Editor's note: The cannabis market is about to hit the gas pedal...

Although cannabis is still illegal on the federal level, we've seen its use legalized in many states in recent years. And the push toward legalization will only grow stronger from here.

At Stansberry Research, we've patiently waited for the right time to enter this evolving industry. More important, we've searched for the right person to lead our research efforts.

Now, we believe we have both.

In this weekend's Masters Series, we're sharing an exclusive interview with Cannabis Capitalist editor Thomas Carroll about what lies ahead for the industry. In the first part, he'll discuss his background as a health care analyst... why this opportunity is much bigger than the end of Prohibition in the 1930s... and why 2018 was a pivotal year for the space...

Why the Time to Invest in the Cannabis Industry Is Now

An interview with Thomas Carroll, editor, Cannabis Capitalist

Dean Jones Jr.: Thomas, thanks for taking the time to speak with us today. As Stansberry Research's newest analyst, a lot of folks might not know much about you.

Let's start there... Tell us a little bit about what you were doing before you joined us.

Thomas Carroll: For the last year and a half, I've taken a sabbatical from Wall Street. You could call it a much-needed respite to get my head back on straight.

Prior to that, I was a managing director at Stifel Financial for about 18 years. While at Stifel, I oversaw investment research on health care stocks. I also did some "angel investing" along the way.

I think I was pretty good at what I did...

Fortune once ranked me as the No. 1 health care analyst in the U.S. And I've also won the Wall Street Journal's "Best on the Street" award. Through the years, I also received a couple StarMine Analyst Awards. They're basically a way to recognize the top "sell-side analysts" in the industry.

Now, some of you might not be familiar with what sell-side analysts do... We're basically the people who study everything about a company and then offer our thoughts to clients. When you see advice that rates a stock as a "strong buy" or "neutral"... that's a sell-side analyst.

I also worked for Legg Mason before Stifel. And before that, I received my master's degree from the Johns Hopkins Bloomberg School of Public Health.

Plus, as I told Digest readers earlier this month, I grew up in a health care family.

Dean: That's quite an impressive resume. And we're not just talking about one or two years here, either. You've been well-connected within the health care industry for more than two decades – developing a reputation for finding one incredible investing opportunity after another. What are some of the biggest winners you've uncovered in your career?

Thomas: I think some of our best picks came in the wake of the financial crisis.

Coinciding with that was also the beginning of the health care reform debate that resulted in the Affordable Care Act. You're probably more familiar with it as Obamacare.

As things played out a decade ago, health care stocks got a double dose of uncertainty.

But my team and I never felt like health care was going away. We picked some winners that had the right combination of low valuations and favorable longer-term outlooks.

Our biggest winners included big health insurers Anthem (ANTM) and UnitedHealth (UNH). Anthem has rallied roughly 500% since then... And UnitedHealth is up around 900% or so.

A smaller government-focused company – WellCare Health Plans (WCG) – also treated us well...

We recommended that one back in 2010 after it had experienced a lot of volatility. The company ran through a number of management teams. And it actually had its headquarters raided by the FBI for fraud. Of course, we were wary of that whole situation.

But after looking through the risks involved with that – and once the stock price was hammered down – we decided to get back in. We saw an opportunity in the company getting turned around by new management...

We recommended buying into the dips when the stock traded for around $28 per share. The stock reached a high of more than $320 last September. It's still at around $270 today.

So yeah, you can say that all three of those turned out to be great stocks in the long run.

We also correctly identified a new big trend in the early 2000s...

Medicaid, the government's insurance program to help people with limited income, was getting privatized. That meant billions of dollars being spent directly by states would now be flowing though health care companies.

This massive switch created some of the best stocks in health care. WellCare fit into that, too. I mention this because Medicaid privatization has parallels to the current push to legalize cannabis today.

Dean: After hearing all that, it seems like you loved what you did every day. So I have to ask... Why did you decide to say goodbye to Wall Street and leave all that behind?

Thomas: I loved it. It was an absolute blast. A lot of hard work – and often stressful – but quite exciting at the same time.

You see, I was in a part of Wall Street called "equity research."

Over the years, more and more regulations were layered onto Wall Street research to weed out the bad apples. Those additional layers of regulation were a giant headache.

Quite simply, it wasn't fun anymore.

In the last few years of being an analyst, we began to see all kinds of neat health care companies coming out of the woodwork. A lot of technology and digital health care solutions that offered a lot of potential. I began to do research on these types of companies. Ultimately, I raised a small fund and completed five deals.

One of these deals funded a medicinal cannabis company...

I have to say, it was amazing to do my homework on that one. Like most people, I had no idea about the opportunity of cannabis from a health care perspective.

I also couldn't believe how misaligned and misjudged this plant was. I mean, it's much safer than alcohol. You can't overdose on it. Yet our government had classified it basically the same as heroin. From my research, I became quite interested in the whole topic.

Dean: Before we go any further, I think we need to make sure everyone knows what we're talking about when we're referring to cannabis. It's basically the scientific name for marijuana. But beyond that, what else do readers need to know about the plant itself?

Thomas: As subscribers do their homework, they will come across two types of cannabis plant. It's actually a lot more complicated than that, but I think this is the easiest way to describe it. One is called "cannabis sativa." The other is known as "cannabis indica."

Cannabis sativa is rich in a compound called "cannabidiol" – better known by the acronym "CBD." It offers health and wellness benefits – such as pain relief, use as a sleep aid, and other relaxing properties. It doesn't have any psychoactive effects.

Hemp, which you may have heard of, is a cannabis sativa plant. Hemp is used in everything from lotions to dietary supplements and even auto parts.

The other cannabis plant – cannabis indica – is where marijuana comes from. This cannabis plant is rich in "tetrahydrocannabinol" – or "THC." THC is the compound that creates the high that people get from smoking marijuana. It's the main psychoactive component in cannabis.

Dean: You'll often hear the decriminalization and legalization of cannabis compared to the end of the Prohibition era in the alcohol industry almost 100 years ago. But you've made it clear that you believe this shift is much bigger than that. Can you explain why?

Thomas: Prohibition – or the end of it in 1933, with the ratification of the 21st Amendment – moved alcohol from being an illegal substance for about 13 years to a legal one again.

Alcohol is primarily used for recreational purposes, right? A glass of wine after work... Or a couple of beers with your buddies over the weekend.

Cannabis, on the other hand, has the opportunity to disrupt not only recreational industries like that, but also things like health and wellness, medication, adult beverages, and more. All together, we believe medicinal and legal cannabis has the chance to disrupt markets currently worth more than $500 billion. These numbers are almost unfathomable.

Dean: You're right. It might be hard for people to imagine the potential we're talking about, but sometimes it helps to see the numbers involved. How does that all break down?

Thomas: Let's start with the recreational disruption. That means alcohol and tobacco.

Each of those is a roughly $100 billion market in the U.S. today. That's $200 billion right there.

Add in health and wellness at $80 billion to $90 billion. By that, I'm talking about vitamins, lotions, creams – stuff like that. They aren't specifically medicines, but they're products made to improve your health and overall well-being.

Now, add prescription drugs into the mix... In 2018, here in the U.S., we spent $360 billion at the pharmacy for our medications.

So you can see how everything easily adds up to more than $500 billion.

Another way to look at the market size is to look at estimates of both the legal and illegal cannabis markets as they are today.

In the U.S., medicinal and recreational cannabis – the legal stuff – totals about $10 billion right now. We can add another $60 billion in illegal sales to that total. In reality, the black market probably still makes up more than 80% of cannabis sales right now.

That means we're talking about a $70 billion market that is happening today. For some perspective, let's consider another well-established market in the U.S. – chicken and eggs. Together, the chicken and egg market totals about $40 billion today. So the cannabis market is already almost twice the size of that. And it's not even fully legal in the U.S. yet.

Expanding this globally, estimates come in at about $200 billion for both the legal and illegal cannabis market. And as regulations loosen across the globe, there may be other potential uses that we are not even thinking about now. Time will tell. I'm excited for the future.

Dean: I think I speak for a lot of folks when I say that I'm intrigued by the potential in the cannabis market moving forward. And the interest is clearly there...

People have written in, asking us when we're going to dive in at Stansberry Research. But for the most part, we've waited on the sidelines. Why is now the time to get involved?

Thomas: 2018 was a pivotal year for cannabis. A number of critical milestones were achieved that cannot be reversed. These things suggest to me that we're at a tipping point.

First, we saw the legalization of cannabis for adult use in both California and Canada...

When California opened its doors for adult-use sales – meaning for recreational purposes – early last year, it nearly tripled the size of the adult-use market from 17 million people to 47 million people. And then, when it officially became legal across Canada in October, that number jumped to 75 million people.

That's an incredible amount of growth... This market grew 340% just last year. And in this space, a single government action can change everything...

Right now, 10 states and Washington, D.C. have legalized adult-use cannabis. Another 25 have legalized medical cannabis. In total, almost within the blink of an eye, more than two-thirds of states have significantly changed the stances on cannabis that they've held for decades. That's why it's so exciting to be investing today. Plus, we aren't alone here...

Big-name companies are also starting to get involved in the cannabis space. Altria (MO), Constellation Brands (STZ), and Molson Coors Brewing (TAP) – just to name a few – all made big investments in cannabis companies over the past year.

In December, Altria – which, as you know, is the top cigarette maker in the U.S. – invested $1.8 billion for a 45% stake in Cronos (CRON), a Canadian cannabinoid producer and seller. Altria also has the option to increase its stake to a 55% majority ownership if it wants to.

Constellation, which makes Corona beer, invested $4 billion in cannabis company Canopy Growth (CGC) last year. Molson Coors, the fifth-largest global brewer, announced a joint venture with Canadian cannabis producer Hexo (HEXO-TO). And Anheuser-Busch InBev (BUD) – the world's leading brewer – announced a partnership with Tilray (TLRY), a pioneer in medical cannabis.

It has also been suggested that Coca-Cola (KO) is interested in making cannabis-infused beverages. This market is estimated to become worth $50 billion per year in the U.S. alone, according to at least one Wall Street analyst.

Dean: When you see mainstream businesses getting involved in the cannabis market – especially the big-name alcohol companies like that – what does that tell you?

Thomas: I think it means two things...

First, plain and simple, these companies are looking to protect their turf.

If you look at states that have legalized cannabis for recreational purposes, you'll see that sales of alcoholic beverages decline. Back in December 2017, researchers from the University of Connecticut and Georgia State University released a study that suggests as much as a 15% drop in states with medicinal cannabis laws.

Second, I've spoken with some of these companies about their strategies.

From those conversations, I believe these companies think this is a great opportunity and that they're well-positioned to profit as this massive trend plays out in the years ahead.

These big-name alcohol companies create, brand, and distribute a heavily regulated product. That setup sounds pretty similar to what the cannabis industry will become.

Editor's note: During a special event earlier this week, Thomas sat down to discuss the incredible opportunity in cannabis today... plus the exact steps he believes you should take to profit. If you missed it, you can still catch up on the key topics we covered right here.