Story Highlights
- The cannabis industry is rapidly expanding, even though stocks fell in 2019.
- But infused drinks promise to revolutionize the sector.
- Anthony Planas shares two ways you can profit from the rally in 2020.
This was a hell of a year for cannabis.
It marked the first full year of legal cannabis sales in Canada.
Stateside, Illinois legalized adult use. And Michigan kicked off recreational sales this month. That brings the total number of states with legal adult use to 13.
And nine more are set to vote on marijuana laws in 2020.
The cannabis sector is swelling, with over 300,000 jobs added to the economy. All in, the U.S. market is set to rake in more than $12 billion in sales this year!
But you wouldn’t know that by looking at stock prices.
One popular exchange-traded fund (ETF), the Horizons Marijuana Life Sciences Index ETF (Toronto: HMMJ) — which tracks major Canadian producers — is down 53% on the year.
And the American Cannabis Operator Index, which tracks U.S. operators, is down roughly 50% on the year.
The divide between the surge in the cannabis industry and cannabis stock market; and the blow to stock prices is leaving many investors uncertain.
But with the new year come new opportunities.
Here’s why I see a huge rally in cannabis … with a word of caution.
Cannabis 2.0 Launches in Canada
The biggest names in alcohol have poured billions of dollars into developing a new breed of cannabis products.
Constellation Brands, Anheuser-Busch InBev (AB InBev) and Molson Coors Brewing have partnered with Canadian producers to develop infused drinks. These are the same names behind popular brands such as Corona, Budweiser and Coors.
And after more than a year in development, we are expecting a sizable launch in early 2020.
Tilray and AB InBev are taking a slow start with their joint-venture (JV) launch of Fluent Beverage Co. It is starting with a CBD-infused drink.
Remember, CBD won’t get you high. But studies show that it helps with forms of epilepsy, depression, insomnia and more.
THC covers the recreational side. It does get people high.
Hexo and Molson Coors’ JV, Truss, is also starting with a CBD-based drink. The “spring water” drink, Flow Glow, is made with whole fruit extracts. But Truss has plans to rapidly expand to include THC-infused drinks.
Canopy Growth is taking the most aggressive approach with 11 promised drink lines. Its production line started rolling in November. Products are en route to shelves as we speak.
These drinkmakers are looking to offer huge advantages over alcohol with:
- Low-calorie options.
- No hangover effects.
- New technology that can make drinks in any flavor.
While the Canadian market is only about one-tenth the size of the U.S.’, it offers the perfect testing grounds for these new drinks.
Canada’s strict health codes and full legalization mean that beverage companies can design a drink that is ready for new markets as legalization spreads.
We will see the battle of the brands in 2020 as consumers vote with their dollars on the future of the cannabis stock market. But that also means not every company will win.
The winner will see its share price rally, while companies unable to compete will continue to decline.
2 Ways to Play Cannabis in the 2020s
Here are two ways to play the next decade in the cannabis stock market:
In Real Wealth Strategist, we looked at the best management teams and financials to form our shortlist of companies that we expect to outcompete the sector.
And in Alpha Investor Report, Charles Mizrahi recommends a basket of blue-chip pot stocks. These are companies that are set to profit from growth in the cannabis sector, no matter which producer gets ahead!
But I would caution investors to avoid the major ETFs for the time. The biggest ETFs all hold stakes in financially weak companies. And these will drag on the overall performance and hurt returns.
Good investing,
Internal Analyst, Banyan Hill Publishing
P.S. What are your 2020 investment goals? Are you looking for a steady flow of passive income or speculative plays? I’d love to hear how you are looking to make your money work for you in the new year.
And don’t forget to watch my latest Marijuana Market Update below! Check out my YouTube channel, and hit the subscribe button. That way, you won’t miss any of my weekly uploads.