No matter how you feel about the Presidential election, this past week was a huge win for advocates of legalizing marijuana. California, Massachusetts, Maine and Nevada voters approved recreational legalization, with Arizona the only state where the ballot failed.
On the medical side, Florida, Arkansas, Montana and North Dakota all voted in favor of medical cannabis, a likely first step toward full legalization. This was a huge moment, as traditionally conservative states join blue states across the nation in loosening marijuana laws. A total of 29 states will now permit cannabis use for medical conditions, including cancer and HIV, and eight will permit recreational use, plus the District of Columbia. Considering studies that show it is safer than alcohol and has multiple medicinal benefits, the movement is long overdue.
Are You Booking High Profits?
The industry is breaking wide open at the moment as the ballot wins will increase the number of people in the country that can legally grow, purchase and consume marijuana. It will push the business out of the shadows, take profits away from violent dealers and provide savvy investors with the opportunity to share in the high profits being generated.
The movement is not occurring solely in the United States. Medical marijuana is already legal in Canada, but President Trudeau has promised to make recreational marijuana legal in Canada as soon as next year. The growth over the past 18 months alone has been staggering.
This momentum should also pressure the U.S. federal government to reschedule pot so that it is not treated the same as harder drugs like heroine or cocaine. We are going to see exponential growth in this sector as the legalization wave sweeps the nation. It is worth noting that President-elect Donald Trump has touted his support of medical marijuana, although his views have been something shifting over the years.
The marijuana industry (medical and recreational) is still in the very early innings and there are huge opportunities for new business ventures. This includes growing, processing, medical ventures, branding, new technology, retail, accessories, banking, marketing, legal services, and the list goes on and on. It is still the wild west, new frontier in this massive new sector that is finally being opened up to legal business practices.
Nevada and California expect to use their positions as tourism destinations to direct a flow of marijuana taxes into state coffers. You need only ask Amsterdam how huge the impact has been to their tourism and retail industries. California alone is expected to have a marijuana marketplace worth $7.6 billion by 2020. The opportunity is enormous and many “budding” entrepreneurs are going to generate enormous wealth for themselves and their shareholders.
One particularly profitable area is the cultivation of high quality product. Applying commercial growing techniques and economies of scale, cannabis growers are now able to generate a substantially higher quality product for a much lower price. The margins are multiples higher than growing any other crop and significantly higher than growing indoors.
As demand for high quality product increases due to nation-wide legalization efforts, companies that were early movers in acquiring grow permits, securing land and water and building high-tech greenhouses will benefit greatly. These companies will go from small startups to having market caps in the hundreds of millions within the next few years.
We have previously written about Two Rivers Water & Farming (TURV). The company owns land, water resources and greenhouses designed to grow cannabis in Colorado. After a rough start to the year and issues with their green-house tenants, they are back on track. They have a new tenant in place, revenues have started flowing in from both greenhouse leasing and farm crops and they have started construction on a second state-of-the-art greenhouse on their property. Once complete, the company will have 180,000 square feet of greenhouse space for growing.
During the first weeks of November, the share price more than doubled from $0.52 to $1.17. It has since dropped back to $0.62, but remains up 265% in the past three months. We think this could be an excellent buying opportunity for long-term investors, as the company is currently constructing their second greenhouse.
Their Q3 financials showed a 52% increase in farm revenues, but no revenues yet from greenhouse leasing. This is expected to account over half of their revenues and the vast majority of their profits once they have tenants in both greenhouses. But for the time being, the company is still in the red with a quarterly net loss exceeding one million dollars. This explains the 50% drop in their share price in the past week.
This is a small-cap speculative play and they still have a good amount of debt but offers investors the opportunity for truly outsized returns. More conservative investors may prefer to wait for cash flows from greenhouse leasing in order to better value the company.
Our #1 Marijuana Growth Stock
While we will continue to monitor the progress of Two Rivers Water & Farming, we are much more bullish on another stock that has been generating massive profits for our subscribers.
Our #1 marijuana stock pick is up 60% this week alone and over 375% year to date!!
But we believe these gains are just getting started. This company was one of the first to be granted a grow license by the Canadian government. They produce the highest quality (pharmaceutical-grade) product in the world at the lowest costs in the industry.
They are already profitable and more than doubled earnings during the latest quarter! In addition, they have a strong balance sheet with over $50 million in cash on hand.
But the real growth is still ahead, as they are in the process of TRIPLING their production capacity. They provide unique cost savings, with a CAPEX that is one quarter of the typical indoor warehouse grow facility at around $50 per square foot. They are also well funded for further expansion and executing in all of the right places.
Our subscribers were alerted to this stock in June and have already generated gains in excess of 320%! This one stock pick would pay for our minimal subscription cost many times over.
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