On July 14, the most significant marijuana bill to date hit the U.S. Senate floor.
The Cannabis Administration & Opportunity Act (CAOA) calls for full federal legalization of cannabis. That’s a step further than bills like the MORE Act and SAFE Act… which only tried to ease restrictions on cannabis companies operating in legal states.
And the CAOA comes on the heels of cannabis legalization in Mexico just two weeks earlier.
The Mexican Supreme Court ruled that prohibition of cannabis was unconstitutional… And on June 28, it gave its 130 million citizens the right to grow their own cannabis until politicians could craft rules for commercial growing and selling.
Mexico joins the ranks of Canada and Uruguay as the only countries that allow legal adult-use of cannabis… Another 45 countries have legalized medicinal use.
So the timing of the CAOA isn’t a coincidence. The U.S. is bordered by two countries with legal cannabis… not to mention the 36 U.S. states that have legalized cannabis in some form or another, including 18 with full legalization.
Here’s why this is important to you… We’re in the final moments before the levee breaks.
Over 140 million Americans live in states with legal access to cannabis… And according to an April 2021 Pew Research Center poll, 60% of Americans say cannabis should be legal for recreational and medical use and 91% approve of medical cannabis.
Despite this overwhelming support, the federal government still prohibits cannabis. But the writing is on the wall. Nationwide legalization is coming. And the CAOA is the latest proof.
So this is your last chance to make an asymmetric bet on cannabis… before it goes fully mainstream…
A $340 Billion Market
Last year, the global legal cannabis industry generated $19.5 billion in revenues… And this year, it’s set to break that record with an estimated $24 billion in sales.
But that’s just the tip of the iceberg…
According to Research & Markets, the industry will generate an estimated $90 billion in sales by 2026…
That’s because more countries are considering legalization. For instance, Israel, Italy, and South Africa are making serious progress towards legalization.
Israel’s new government has made legalizing marijuana a top priority… Italy’s supreme court has already legalized small personal amounts… and South Africa’s politicians are working on a bill that would legalize adult-use.
We expect these nations to end prohibition in the next year.
And as legalization spreads, more money will flow into publicly traded cannabis companies. As investors, that’s our opportunity to profit.
But we want to position ourselves before the dam breaks.
Let me explain…
According to cannabis market research firm New Frontier Data, an estimated $340 billion in annual cannabis sales happen on the black market. That’s more than 28 times greater than legal sales.
The end of prohibition will shift that $340 billion to publicly traded cannabis companies. Plus, it’ll expand the opportunities for new cannabis products like infused drinks and edibles.
Global alcohol sales come in at roughly $1.4 trillion per year… And the top-10 biggest alcohol companies are worth about $1.3 trillion.
By comparison, the 10 biggest cannabis companies are only worth about $49 billion combined.
As cannabis catches up to beer, wine, and liquor sales… we could see the entire cannabis market grow a staggering 17x from current levels… And some of the biggest names could go on to return over 27,000%.
So we have the chance to buy into the next Anheuser-Busch or Diageo before it explodes onto the world stage.
Even better, you don’t have to be an insider or invest a fortune to see those thousand-percent returns…
Bet Small, Win Big
Cannabis stocks represent what we at PBRG call an asymmetric opportunity. Here’s Daily editor Teeka Tiwari on the power of asymmetric bets:
An asymmetric trade is one where the potential upside of a position greatly exceeds its potential downside. Opportunities that have the potential to go up 10x, 50x, 100x, or even more than the entry price.
If you risk $500 for the chance of making $50,000, you’re making an asymmetric bet. This approach allows you to turn tiny amounts of money into life-changing gains without putting your current lifestyle at risk.
Sounds simple enough… but these asymmetric opportunities are hard to find… and even harder to act upon.
That’s because asymmetric opportunities are often misunderstood… And by the time everyone catches on, the biggest returns are long gone.
Take cryptos like bitcoin and Ethereum… Big T first recommended bitcoin in April 2016.
At the time, some people dismissed cryptos as magic internet money. Warren Buffett even called bitcoin “rat poison squared.”
But Teeka saw the power of blockchain technology to disrupt the traditional finance industry… and his subscribers saw the chance for life-changing returns.
Those who followed him in 2016 when he first recommended bitcoin saw the chance to make returns as high as 15,933%… enough to turn $1,000 into more than $160,332.
Today, we see a similar opportunity in cannabis…
Remember, even with federal prohibition, the industry generated nearly $20 billion in sales last year. And by 2026, it’ll more than triple to $90 billion.
And that doesn’t account for the $340 billion in spending that’ll eventually flow into the space once prohibition is ended. That’s a potential 17x gain right there.
So now’s the time to position yourself. Especially while sentiment in the cannabis space is low… and quality companies are trading at massive discounts to their all-time highs.
Like crypto, cannabis stocks are highly volatile. So you’ll see wild price swings. But as Big T says, that’s the price we pay for the chance to make life-changing gains.
Once sentiment catches up to the facts on the ground – like the CAOA bill in the U.S. Congress and legalization in Mexico – we’ll see cannabis stocks explode to the upside again.
If you’d like broad exposure to this trend, consider the AdvisorShares Pure US Cannabis ETF (MSOS). The fund holds a basket of top-performing U.S. cannabis companies.
Remember, the key to asymmetric bets is rational position-sizing. Smaller investors should only invest $200 to $400… And larger investors should only invest $500 to $1,000.
Smaller position sizes will limit your losses… while still setting you up for the chance at the life-changing gains we expect to see in legal cannabis.
Invest with conviction,
Analyst, Palm Beach Daily