I’ve been a professional investor from the tail end of the 1980s… through the ’90s and the “noughties”… and now into the “teens.”
Over these four decades, I’ve made obscene amounts of money by applying the same simple strategy.
Now, in this age of computer-driven trading, few strategies can hold up over such a stretch of time. Yet this simple method has made me money across a number of assets classes and industries.
And today, there’s an industry exhibiting all the telltale signs I look for when using this approach. You could make an absolute fortune from it.
It’s at the very beginning of a massive, multi-decade trend. And that’s critical. The underlying industry must have a long road of widespread growth ahead of it.
I won’t use this strategy under any other circumstances.
I’ve learned if you can get the growth trajectory of an industry right, you don’t need perfect timing. The phenomenal growth of the primary trend will bail you out…
But no matter how big or powerful a trend is, nothing goes up in a straight line. And that’s where the second part of my method comes into play.
You see, in early stage megatrends, the market is full of fear and fantasy.
On the good days, fantasy takes over and prices are insane. But on the bad days, fear takes over. And everything’s priced as if the trend is about to collapse.
The key is, each new flight of fantasy takes prices to new highs—and each bout of fear ends in higher lows.
This pattern of fear and fantasy can alternate for years. Meanwhile, the stocks in the sector can go up five, 10, or even 100 times or more.
So it’s important to recognize a massive trend and where you are in it. The earlier you’re in the trend, the more money you’ll make as the market flip-flops between fear and fantasy.
And a classic, textbook case of this phenomenon is the legal cannabis space. The legalization trend of intoxicating and non-intoxicating cannabis will be with us for decades…
An Unstoppable Trend
According to Research and Markets, the global cannabis market is expected to reach $154.8 billion by 2026.
And Merrill Lynch estimates that non-intoxicating cannabis alone will disrupt $2.6 trillion worth of industries in the next few years.
This is the definition of a massive, unstoppable trend. The good news is, we have an opportunity to profit right now from a coil of fear wrapping itself around the cannabis market’s throat.
Let me explain…
On July 22, the Food and Drug Administration (FDA) issued a warning to Curaleaf, one of the world’s largest legal cannabis companies.
In the FDA’s opinion, the company has been making unsupported health claims about its non-intoxicating cannabidiol (CBD) products.
Unlike the tetrahydrocannabinol (THC) found in marijuana, CBD isn’t intoxicating. It doesn’t get you “high.”
Like any other drug, CBD falls under FDA regulations. And that creates issues for how companies market CBD products.
Of course, CBD is a valuable new alternative to many existing dangerous and expensive drugs. But it’s no panacea, either.
So we think this action was long overdue. Too many companies make outlandish, unproven claims about CBD.
Now, the FDA’s warning spooked the entire cannabis market… Curaleaf shares fell nearly 10%. And the Horizons Marijuana Life Sciences Index ETF (HMLSF) has been down as much as 30% from its highs.
But here’s the thing to remember: This trend of legalization is unstoppable.
The genie is out of the bottle. There’s no putting it back in. Non-intoxicating cannabis (CBD) is already federally legal.
And right now, 33 states (and Washington, D.C.) have approved medical cannabis. Plus, 11 of those states (and D.C.) have approved recreational marijuana as well.
As I write, dozens of bills are weaving their ways through state legislatures and Congress. And they all point towards one indisputable fact: Cannabis laws are changing.
In fact, lawmakers introduced a congressional bill last week that would decriminalize marijuana at the federal level. It’s the most comprehensive attempt at wide-scale legalization yet.
Now, to be clear, there’ll be more warning letters and negative headlines as this space develops—along with lawsuits and aggressive reports from short sellers.
But friends, hear me out when I say you must view these sell-offs as buying opportunities. Use them to buy a basket of well-curated cannabis companies… and you’ll be laughing all the way to the bank.
I want you to remember: Like bitcoin, legal cannabis is an asymmetric bet. So we only need to risk a little on each idea to make a lot in return.
Expect plenty of volatility—but be thankful for it, too. The same volatility promises to launch this new asset class much higher in the coming years.
Let the Game Come to You!
Editor, Palm Beach Daily