Cryptos and weed, baby. That’s how my friend Dan Denning described the preoccupations of the investment world a while back.
Did the investment committee for the Church of England put it like that too? Probably not — but apparently it came to a similar conclusion.
Did you see this?
The Financial Times reports1 that the men and women behind the Church’s 12.6 billion pound portfolio have lifted a self-imposed ban on investing in the marijuana industry.
To be clear: Don’t expect to see a vicar lighting up a massive doobie in London. The Church is happy to consider investing in medicinal marijuana for health purposes.
This news has come fairly fast after medicinal marijuana was approved in the UK in October last year.
And why not? Cannabinoids could treat a range of human conditions and help alleviate suffering. But this is an important signal for investors, too…
I don’t believe there is ‘smart’ money in the market so much as there is ‘big’ money.
An institution like the Church of England is ‘big’ money, like one of our super funds. Where it decides to invest is important.
If you can get there first, your holdings can float higher as a tide of liquidity pours into it.
That’s where the cannabis industry is right now (and crypto, too). They’re plenty of big money players yet to get involved here.
That’s the first thing.
The second is that the Church is blessing the use of the plant itself. Don’t forget that marijuana is stilled classed as a ‘Schedule 1’ drug in the United States.
So, in part, it’s officially viewed as having no medical benefit. That’s stymied research into marijuana for decades and limited conclusive trials.
The Church of England’s latest move will help regulators worldwide remove some of the restrictions and roadblocks that the cannabis industry keeps running into.
THREE WILD MARKET PREDICTIONS FOR 2019
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This should be good news for the local ASX cannabis stocks. Worldwide developments are important.
Could we see more deals and mergers here?
A 50% premium on the table
I say that because cannabis play Creso Pharma [ASX:CPH] announced a merger plan with a bigger Canadian player called PharmaCielo last week.
The proposed deal puts a 50% premium on Creso’s previous trading price.
It’s no surprise in the sense that Creso has multiple angles to cash in on the industry trends forming all over the place. But there are plenty of other stocks also in play like this on the ASX.
I don’t think it’s an exaggeration that you could consider focusing on this sector exclusively for the next several years.
If you object to recreational marijuana, there’s nothing stopping you doing the same thing as the Church of England.
The upside from medicinal marijuana alone is enormous. And there are so many angles here.
There are possible treatments for a variety of different conditions, multiple delivery methods and separate companies at all points on the supply chain.
Here’s the other thing I like about cannabis in general: You can divorce it from the wider macro news. We have no sure way of knowing what Trump or markets will do next.
But I’m pretty darn sure there’s going to be a much bigger cannabis industry in 10 years.
The key is to buy right and hold on…
A great sector for concentrated stakes
Let’s consider the wisdom of US investor Bill Miller here. He still holds the record for the longest consecutive winning streak on Wall Street (15 years).
A reporter for The Wall Street Journal recently2 asked him how he achieved his 20% annual return over the last 10 years.
He answered, in part:
‘You want to buy things where the volatility and perceived risk are above the market. That’s somewhat oversimplified, but the strategy likely gets you in areas of the market where there are excess returns.’
Don’t let me put words in Mr Miller’s mouth…but the cannabis industry fits this bill to me.
Here’s something else, and it’s important for us Australians. Cannabis is one of the few industries growing at high rates that we can access on our home market.
You’re unlikely to make a killing in Australian retail anytime soon. There aren’t too many sectors of the Aussie market really hitting the ball out of the park.
Cannabis fills this need nicely. The reward is huge and the risks are not prohibitive. This story can run for a long time, too.
Yes, there’ll be dips and rallies and shifts in sentiment.
But it’s the place to be hunting for a steady stream of good news, announcements and deals.