Cold winds blow down the streets of Baltimore. The colours of autumn are everywhere, but the sky is grey.
We’re in town for a series of meetings.
One of our US colleagues that covers the marijuana industry forming in the United States and Canada presented today.
Canadian pot stocks have boomed this year.
‘The valuations in Canada are too high now,’ our colleague Tim told the assembled crowd. ‘And the level of early earnings from the legalisation won’t be revealed to the market until earlier next year, anyway.’
Recreational marijuana only became legal in Canada in October. The company earnings being reported now came before this.
Have we missed the boat?
Not so, said Tim. It just takes a different approach. You can’t expect to buy Canadian pot stocks now and make returns in the range of 100-500% in the short-term.
They made their run before the law came into effect last month.
Tim said US marijuana stocks are cheap compared to those in Canada.
There’s a catch. The regulatory framework in America makes for tricky waters.
It’s still illegal at the federal level. Major US corporates are reluctant to get involved. The risks are too high.
It’s the individual states that are pushing for legalisation.
Some only make it legal for medicinal purposes. Others go a step further and let the working stiffs have their fun too.
The American state governments need the tax revenue more than anything.
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The potential of the industry is enormous. It could go global, too.
And what of Australia marijuana stocks? Readers have written in a few times over the last year why there were none on the buy list of Small Cap Alpha.
We demurred for a reason. It was a question of timing.
Marijuana stocks in Australia skyrocketed around March 2017. Our service didn’t exist then.
By the time it did, the odds of the ASX marijuana stocks going higher were poor considering their level of actual cash coming in. You can only fly up for so long on potential.
Prudence is sometimes rewarded. Marijuana stocks on the ASX have pulled back over the last 12 months.
Now, we’re getting more interested.
We did tip a stock with an angle into the market in July. It’s up about 40% thus far. Only time can tell whether it can keep pushing up – but the early signs are excellent.
Our little stock is where all the action is right now – North America.
The US is ten times the size of Canada. The market is huge. The use cases for marijuana and hemp are also enormous.
Both Donald Trump and the Mexican President are said to be sympathetic to full decriminalisation.
That’s why we tipped it.
We’ll have more on this trend in a future update. Profit Watch needs to cut things short today. Another meeting beckons.
Just remember the advice of our colleague Tim – Canadian pot stocks have likely peaked for the time being. Look for a better potential return in the US or Australia.