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Trade Alert: A new stock in another Revolutionary sector

March 22, 2019 by Cody Willard Leave a Comment

The stock markets are trying to give back all their gains from this week and then some. Be careful, but maybe do some nibbling if you did some trimming when I was suggesting it earlier this week. And if you’re freaking out over today’s sell-off, it might be time to trim a little bit more anyway, just to let out some of the pressure.

Now onto today’s Trade Alert:

I happen to believe, like Warren Buffett and most other investors, that there’s going to be billions of dollars made in The Cannabis Revolution.

That said, my theory is that even the best of the stocks in the marijuana sector are way overvalued and too risky. I expect that we’ll see at least one more crash in the marijuana stock sector which will help to cut off access to capital for the crappy/fraudulent marijuana companies that are going to end up going bankrupt at some point. That next crash will actually help the industry, much like when the dot com bubble crashed and the crappy dot coms like Pets.com and the fraudulent dot coms went bankrupt which helped enable the winners like Google and Amazon and Netflix to continue to rise.

Now all that said, I’ve got a play on The Cannabis Revolution for you, and it’s going to surprise you. I’m buying Altria Group symbol MO. I don’t like the fact that the company sells nicotine and propagandizes and tries to get people addicted and all that. But then again, as you guys know, I don’t like the fact that Facebook invades mine and other people’s privacy without our consent or that Google tries to get my children addicted to YouTube Kids. And running a hedge fund, I’m in the business of trying to find asymmetric risk/reward scenarios and that’s what MO is.

The company has already invested about $2 billion into a cannabis company called Cronos. Cronos, among other things, is focused on developing synthetic cannabinoids. As Altria has also invested billions into e-cigarette maker Juul, you can imagine one day they might be selling e-joints made with synthetic pot for very high margins.

Remember my analogy about how Campbell’s can use their distribution network to run higher margin content to end users? That’s what we have with Altria too.

So what we have here is a play on The Cannabis Revolution that is trading at 12x earnings with a nearly 6% dividend instead of the 200x next year’s sales estimates that you see for The Cannabis Revolution pure plays.

 

Related posts:

Trade Alert: Hedging my fruit and a new way to think about your money
Trade Alert: China Trade War opens opportunities
Trade Alert: Now is not the time to panic
Trade Alert - Here comes the next tech bubble (but for now, two new hedges)
Trade Alert - Remember my outrageous Facebook price target?
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Filed Under: Trade Alert

Disclosure: At the time of publication, the firm in which Willard is a partner and/or Mr. Willard had positions in some of the stocks mentioned above although positions can change at any time and without notice.

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This does not constitute an offer to sell, a solicitation of an offer to buy, or a recommendation of any security or cryptocurrency or token any other product or service by Cody Willard or any other third party. Furthermore, nothing in this is intended to provide tax, legal, or investment advice and nothing in this should be construed as a recommendation to buy, sell, or hold any investment or security or cryptocurrency or token or to engage in any investment strategy or transaction. You are solely responsible for determining whether any investment, investment strategy, security or related transaction is appropriate for you based on your personal investment objectives, financial circumstances and risk tolerance. You should consult your business advisor, attorney, or tax and accounting advisor regarding your specific business, legal or tax situation.

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