Nick’s Note: Next month, Canada will vote to officially legalize marijuana. There will be fortunes to be made when this happens. But the marijuana industry is full of risk and uncertainty… making it a minefield for investors.
That’s why I reached out to my colleague Justin Spittler, editor of the Casey Daily Dispatch. Justin’s traveled the world to research opportunities in this space. Today, he reveals a safer way to play this trend than buying marijuana stocks.
By Justin Spittler, editor, Casey Daily Dispatch
Early investors made an absolute fortune.
And all it took was a small investment.
If you put just $10,000 into this stock in 1970, your investment would now be worth $4.6 million.
That’s a return of 45,000%, or 18 times what the S&P 500 returned over the same period. That’s also more than IBM, Phillip Morris, and Coca-Cola returned over the same period.
Can you guess what company I’m talking about?
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If you said McDonald’s, give yourself a pat on the back…
McDonald’s is one of America’s most iconic companies.
It’s a household name. And yet most people don’t understand the business at all.
They think it’s a fast food company. But it’s really a real estate company.
Even Ray Kroc, the founder of McDonald’s, admitted this…
We are not technically in the food business. We are in the real estate business. The only reason we sell fifteen-cent hamburgers is because they are the greatest producer of revenue, from which our tenants can pay us our rent.
That’s right.
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McDonald’s doesn’t make money selling burgers and fries…
It makes money buying and renting real estate to its franchisees, often at a steep markup.
It’s a simple business model. But it works.
It’s why McDonald’s is one of the most dominant companies on the planet. It’s also why many early McDonald’s shareholders are sitting on fortunes today.
But don’t worry if you didn’t buy McDonald’s 50 years ago.
Today, we have the chance to buy the “next McDonald’s.” And once again, this opportunity lies in an emerging industry that few investors understand.
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I’m talking about the legal marijuana market…
If you’ve been reading the Dispatch, you know marijuana legalization is sweeping across the country.
In November, five U.S. states voted to legalize marijuana outright. Twenty-nine states along with Washington, D.C., now let you use marijuana for either medical or recreational purposes.
It’s now only a matter of time before marijuana becomes legal nationwide.
This is good news for everyday Americans. It means they’ll have more freedom over what they put in their bodies. But it’s even better news for marijuana business owners.
And that’s because the legal marijuana market is booming.
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The legal marijuana market grew 30% last year…
That’s nine times faster than the entire U.S. economy grew in 2016. And this boom has only just begun.
By 2021, legal marijuana will be a $20 billion industry. That’s nearly three times bigger than it is today.
This makes legal marijuana one of the best investing opportunities to come along in decades.
Investors are starting to figure this out. That’s why the average marijuana stock has doubled in value over the past year.
That’s a huge gain for such a short period. But a lot more money will be made in the coming years.
Unfortunately, many investors won’t make the most of this opportunity. That’s because they’ll only invest in companies that grow and sell marijuana.
Now, this may be the most obvious way to play the “green gold rush.” But that doesn’t make it the best. Here’s why…
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Marijuana will soon become a commodity …
It will become more abundant and cheaper than ever before.
In fact, this is already happening. Since 2015, the wholesale price of marijuana has plunged from around $2,100 per pound to $1,600 per pound.
That’s a huge decline. But marijuana will become even cheaper as more states legalize it and technology improves.
This is good for consumers. But it’s bad news for companies that grow and sell marijuana. It means their profit margins will shrink.
But don’t worry. There’s an even better way to cash in on the coming marijuana boom.
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The world’s smartest investors are betting big on marijuana real estate…
The “smart money” is doing this for a few reasons:
Real estate is one of the safest ways to profit off pot. Marijuana real estate companies don’t “touch the plant.” Because of this, they don’t have as many legal and regulatory headaches as other marijuana companies.
Real estate is an appreciating asset. It gains value over time.
You can’t say the same thing about most commodities. They’ve been getting cheaper in real (inflation-adjusted) terms for centuries.
This is why a marijuana business owner in Seattle told me that you want to be a landlord in this business, not a farmer.
Marijuana real estate is highly profitable. Many marijuana properties are seeing cash returns as high as 25%. That’s three times as much money as comparable non-marijuana properties make.
Not only that, some private equity funds that raised capital for marijuana real estate projects are also earning north of 40%.
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Everyday investors can become marijuana landlords, too…
You just have to buy marijuana real estate stocks.
These companies own and lease facilities that grow marijuana. It’s a great business for a simple reason.
Most landlords want nothing to do with marijuana. They’re nervous about what the feds might do. This allows marijuana landlords to charge sky-high rental rates.
Today, a dozen of these companies trade on U.S. and Canadian exchanges. You can view a complete list here
Just remember to do your homework before you buy any of these stocks. Get to know the business inside and out. Vet the management teams. And focus on facts instead of hype.
These simple strategies will set you up for big gains once the green gold rush really takes hold.
Regards,
Justin Spittler
Editor, Casey Daily Dispatch
P.S. I also encourage you to watch this time-sensitive presentation my team and I just put together. It explains just how big the coming opportunity is.
And if you’re interested, it shows how you can invest in the McDonald’s of the marijuana industry. Click here for details.