My Mother Took a 'Good Night' Pill

Doc Eifrig's call to action... My mother took a 'Good Night' pill... Why the cannabis industry is set to boom... The four eras of growth... Most investors are still asking the wrong question... Legalization doesn't matter... A special offer for our Cannabis Capitalist newsletter...

Editor's note: Today, we're sharing an excellent guest essay from our colleague Thomas Carroll...

As regular readers know, Tom is a longtime health care sector analyst and the editor of our Cannabis Capitalist newsletter.

But before we get into Tom's essay, I (Corey McLaughlin) have a quick question – and an opportunity – to share. It's one I want to make sure you don't miss, especially if you're in or close to retirement like I know many of you are.

You see, our colleague Dr. David "Doc" Eifrig, the editor of our terrific Retirement Millionaire advisory (which we most recently wrote about here), is planning to go live in a few weeks with a brand-new urgent retirement briefing.

During the event, Doc plans to show folks the greatest opportunities – and dangers – that American retirees face today... But he also knows many folks thinking about retirement today need more direct guidance than ever before.

So, he wanted me to share this message and call to action with everyone who reads the Digest. Simply put, Doc wants to know...

What are your biggest questions and concerns about retirement right now?

Any and all topics are on the table, and there are no dumb questions. It's very likely that someone else has the same question as you... And to make this the best event possible, Doc wants to know what the most common concerns are today.

So, if you can spare a quick second, please send your questions and concerns directly to Doc in an e-mail to REM@stansberryresearch.com. (Please note, this is a different e-mail address from our regular feedback e-mail... the "REM" is for Doc's Retirement Millionaire.)

Also, longtime readers know this, but just so we're clear... We can't provide individual investment advice, but we can give you the "big picture" information and analysis we think you need to make the best decisions for you – and that's exactly what Doc plans to do.

Doc will share more about the "when" and "where" of his event soon, so stay tuned to your inbox for those details.

With all that said, it's time to turn today's Digest over to Tom...

He wants to share his view on the investible sector he has been watching closely over the past few years... the reasons why most investors are still asking the wrong question about it... and the money to be made if you know where to look. Enjoy...

'Hey Tom, do you think I could smoke it?'

My world completely turned upside down when I (Thomas Carroll) heard my dear Mum utter this simple question...

In mid-2020, my mother turned to me for some advice. She was seeking a remedy for her decadeslong problem with insomnia.

"Do you think this medical marijuana might help?" she said.

My answer was a resounding yes. In fact, one of our state's largest cannabis growers has formulated a pill that is specifically designed for sedation... meaning sleep.

Of course, I was also floored at the ask... This was coming from the conservative woman who raised me and my sister in the age of crack cocaine, University of Maryland basketball star Len Bias's overdose, and the constant barrage of "Just Say No" messaging. I didn't even puff a cigarette until my mid-20s.

For my mum to begin the registration process in Maryland's medical-cannabis program was surreal. But like I said, I was all for it. And in short order, she was approved, and we made an appointment with a cannabis "pharm-D," the PhD equivalent of a pharmacist.

Mum was evaluated and prescribed a bottle of 'Good Night'...

This is a cannabis sleep-aid pill that resembles any over-the-counter pain medication. It certainly wasn't the cannabis my mom had encountered growing up in the 1960s.

Guess what? It worked like magic... Even taking only half a pill an hour before bedtime put her to sleep and kept her asleep all night. She now wakes up refreshed and ready to tackle the day.

Given this experience, Mum is interested in exploring other cannabis options now available to 250 million other Americans across the country. I still (almost) can't believe it...

While using cannabis is a personal choice, just like consuming alcohol, smoking cigarettes, or taking a baby aspirin daily, the U.S. is entering the best time in history to explore the benefits of cannabis. Regulated, tested, high-quality cannabis is safe and effective when used correctly for your health and wellness.

And, still, the industry is just getting started...

Millions of people, just like my Mum, are dipping their toes in the water...

I write the monthly Cannabis Capitalist investment research newsletter for Stansberry Research. But as I like to say, "I'm a stock analyst, not a consumer." (This is mostly true, as I'm a troubled sleeper as well).

And as a stock analyst, I believe right now is a fantastic time to be investing in cannabis companies.

Now, this might surprise you... You might be thinking, how can we invest in something that remains federally illegal? Shouldn't investors wait until cannabis is fully legalized by the federal government?

In my view, the answer to this question is a resounding no.

If you wait, you will have missed the boat for big gains...

I've written about one such stock here in the Digest before...

I call it the "Home Depot" of the cannabis industry and you'll often see the ticker at the bottom of our daily e-mail here, as one of Stansberry Research's "Top 10 Open Recommendations."

As I write today, our position is up nearly 400% since my February 2020 recommendation.

In short, it's time that you put aside any perceived stigma that you have about cannabis... The decadeslong, failed War on Drugs policy did far more damage to perception than good about reality.

And if you just can't get past your long-held beliefs – well, frankly, what I'm going to say today isn't for you... and you're in the minority.

The early boom-and-bust volatility of the emerging cannabis sector may be softening...

I believe material investment returns will be made in the decade ahead, without the wild market swings seen the last several years.

Let me explain...

Meaningful cannabis milestones have been achieved. In 2020, the cannabis sector evolved from having sketchy beginnings to becoming a "real" industry.

From growth in legal state medical programs... to emerging adult-use markets... to federally legal hemp... to a U.S. Food and Drug Administration-approved cannabis drug... to the first company achieving $1 billion in sales... These accomplishments cannot be taken away. They have laid the foundation for a solid market.

Professional companies. There are now many cannabis companies with real management teams, independent boards, hundreds of millions in revenue, and strong balance sheets. For example, publicly traded Curaleaf (CURLF) or privately held Curio Wellness.

Milestones have created the playing field on which to build real businesses. These cannabis companies are no longer "lotto ticket" stocks... They are investable today.

Supportive lawmakers. Perhaps most important, the current White House and Congress are much more cannabis-friendly than any other lawmaking administration in history.

The meaningful cannabis milestones achieved and yet to be achieved are now backstopped by lawmakers with new-world thinking... As the Pennsylvania Lt. Gov. John Fetterman said recently in an interview, "Cannabis is not a drug. It's a plant."

Cannabis is truly at a tipping point...

This moment didn't happen overnight...

There have been four distinct eras of cannabis investment and growth... over the past 25 years.

I think it's helpful to run through each of them, to see how legal cannabis evolved... and how it will continue to grow in the coming decade. These landmarks support our current bullish view of cannabis...

1. Grassroots business development, 1996 to 2010

It all started (legally that is, in the U.S.) in 1996, when California created the first medical-cannabis program in the country. Two years later, Alaska, Oregon, and Washington joined this new market.

Early investors and entrepreneurs took big risks both financially and legally to get started. They faced challenges ranging from fear of federal raids to operating a cash-only business to a "not in my neighborhood" mentality that limited locations.

2. From "toehold" to "foothold," 2010 to 2018

As legal cannabis programs expanded across the U.S., professional investors and sophisticated entrepreneurs took note of the massive opportunity emerging.

Investment bankers quit their high-paying jobs to form startups. Former pharma executives came out of retirement. Cannabis-focused private equity companies, like Key Investment Partners, were formed. And I know of at least one former health care analyst that made an early, hefty investment in a medical cannabis startup.

This is when the current big U.S. cannabis companies got their start. Again, such as Curaleaf.

3. A new, investable market takes shape, 2018 to 2020

With national legalization of cannabis in Canada, U.S. cannabis companies went public through "reverse takeovers" of already publicly traded Canadian companies. This gave them a new currency to fund future growth.

Soon, individual investors went from merely dabbling to outright trading in cannabis stocks. Cannabis-focused hedge funds were formed. Foreign subsidiaries of investment banks hired equity research analysts and bankers to cover the explosion in the number of cannabis stocks.

Exchange-traded funds ("ETFs") were launched that focused on cannabis. Billion-dollar cannabis companies Canopy Growth (CGC) and Tilray (TLRY) became household names on CNBC.

4. The full monty, 2021 and beyond

This year, as we expected, the industry has kicked into high gear, and it's about to see real, risk-adjusted returns. In November 2020, Joe Biden and Kamala Harris won the White House. Like them or not, they are cannabis-friendly...

And just days into 2021, the Georgia Senate runoff election pushed the Senate Blue, giving Democrats 51 potential votes. These elections gave the U.S. a best-case policy outcome for cannabis. Everything that has been built and established up to this point will now begin to see real, supportive, and rational federal regulatory support for this inevitable new market.

It won't be smooth sailing, but the balance of power has shifted...

Today, there are several publicly traded U.S. cannabis companies that are completely investable...

This year, we will see the first cannabis company meet and exceed $1 billion in total sales. It is amazing that these stocks are still trading over-the-counter, or OTC.

As of this writing, 21 states have robust medical-cannabis programs, 19 have approved adult-use markets, and 10 continue to forbid cannabis with psychoactive properties.

Said differently, 77% of the U.S. population has access to a legal-cannabis program. This includes both adult-use and medical-only markets.

Where is the federal government in all of this? Aren't our leaders in Congress supposed to represent us? Why does cannabis remain illegal at the federal level?

Those are great questions... but the point I want to get across today is that, when it comes to investing, these questions don't really matter... or not in the way you might think.

Federal legalization will eventually happen in some form. Over the years, a number of bills have been introduced in Congress that seek to legalize cannabis. And as we've said, right now there is more support than ever from lawmakers.

But here's why legalization is a moot point...

In the last decade, there has been something I refer to as "policy conflict" in cannabis. This means things are happening that should not happen, given federal law.

Forty states have pushed forward and created sophisticated legal cannabis programs. This flies in the face of federal law.

The FDA approved Epidiolex – a prescription anti-seizure drug whose active ingredient comes from cannabis. News flash... the FDA is a federal agency.

The Securities and Exchange Commission ("SEC") recently registered shares of Green Thumb Industries (GTBIF), a U.S.-focused cannabis company. Wait... what? Those fully, federally registered shares were then sold to a U.S. institutional investor the very next day.

And many more are following Green Thumb's lead.

You might think that all of this is illegal... Well, the behavior of these federal agencies surely doesn't indicate it.

Another related catalyst for cannabis stocks will be when they are listed on U.S. exchanges. Currently the U.S. exchanges won't list them. Why? Cannabis is federally illegal. They must list in Canada and trade OTC for U.S. investors.

Given the SEC registered shares of a U.S.-focused cannabis company, there is a contradiction at work here...

Now that the SEC has drawn a major line in the sand (a trench?), the exchanges have got to be asking themselves, "Why aren't we listing these names now if the shares are registered in the U.S.?"

We believe this question is currently in discussion among decision-makers...

And there is precedent. In every state with a legal cannabis program, local banks have made the move to work with cannabis businesses. The exchanges are next.

As U.S. cannabis companies get listed, their stock prices will rise significantly. This will open them up to investors an order of magnitude higher. This day is coming soon.

All of this challenges the conventional wisdom that federal legalization must happen first before any real legitimacy can emerge. If federal agencies are allowing things like this to happen, then perhaps congressional action is a moot point...

For so long, the biggest question about cannabis has been "When will it be legal?" Turns out, ignoring this question might be the best thing for investors to do... at least ones interested in riding the biggest upside of the sector and its stocks.

All said, right now is truly a unique time to be an investor in the biggest new market of our generation. Waiting for the federal government to catch up to cannabis is the wrong move...

Legalization is already happening all around us, whether it is made crystal clear by a federal agency or not.

And, if you need some more proof of the path the cannabis industry is on, just remember, my 75-year-old Mum wants to smoke it... and is sleeping better because of it. And she's not the only one.

In my Cannabis Capitalist newsletter, I identify the 'best of the best' in the cannabis industry...

I do the research so you don't have to...

We currently have 13 open positions after taking profits in two positions last week – one for a gain of 125%. Since the inception of this publication, our average gain is more than 70%.

This compares with an 88% loss in the North American Cannabis Index – which tracks a basket of U.S. and Canadian cannabis stocks – over the same time period. Stock picking is clearly important.

And partly because of the opportunity I see in the sector today, we're offering a special discount right now to anyone interested in a Cannabis Capitalist subscription...

Today, you can get instant access to all of my research at 50% off our regular price. Click here to get started right now.

New 52-week highs (as of 5/14/21): ABB (ABB), American Financial (AFG), CBOE Global Markets (CBOE), Comcast (CMCSA), Dow (DOW), Eagle Materials (EXP), Freehold Royalties (FRU.TO), JPMorgan Chase (JPM), SPDR S&P Regional Banking Fund (KRE), Cheniere Energy (LNG), Markel (MKL), Motorola Solutions (MSI), Novo Nordisk (NVO), Oshkosh (OSK), Seagate Technology (STX), TFI International (TFII), and Vanguard Short-Term Inflation-Protected Securities Index Fund (VTIP).

In today's mailbag, feedback on Mike Barrett's Thursday Digest... and thoughts on Tesla (TSLA) CEO Elon Musk's recent behavior and our Dan Ferris' analysis of it over the past few weeks. Do you have a comment or question? As always, please e-mail us at feedback@stansberryresearch.com...

And don't forget, as we said at the start today, you can send your questions and concerns about retirement to Doc directly at REM@stansberryresearch.com.

"If Biden aims to help poor people, why are we getting stimulus money that we don't need or want? Who is going to save the people who DECADES from now will be paying for this?" – Paid-up subscriber Dyana H.

"We had a true leader in office that could have done so much more if Democrats didn't devise a Russian collusion scheme to waste resources and time. [Lyndon] Johnson didn't have all that, he threw money at it. Biden will do the same and it won't work either.

"The V.A. Hospitals are a good example, programs need to be sustainable. It never will work if government managed it. Our healthcare would be better run if Costco or AAA ran it, lean and efficient.

"That's why Johnson's war on poverty failed. This is why cryptos are doing so well, get away from government control." – Paid-up subscriber Larry M.

"Dan Ferris nailed his Tesla analysis! It looks like Elon Musk is trying to strong arm crypto miners into reducing their carbon footprint. And, of course, he's got regulatory credits they could buy?" – Paid-up subscriber Patrick F.

Good investing,

Thomas Carroll
Baltimore, Maryland
May 17, 2021