'Never Tell Your Friends What Dad Does'

'Never tell your friends what Dad does'... The growing acceptance of cannabis in America... More politicians are accepting it, too... The biggest deal in U.S. cannabis history is just the start... Why Joe Biden could kick off a massive rally in pot stocks...

A couple of weeks ago, my wife did something that shocked me...

Though I love her dearly, you should know that my wife is hopelessly "old school."

As regular Digest readers know, I (Thomas Carroll) spent more than 20 years analyzing the health care sector before joining Stansberry Research earlier this year. I worked all across the landscape, including health care investing at Legg Mason and Stifel Financial.

Eventually, though, I decided to leave Wall Street behind... Now, I'm the editor of Cannabis Capitalist – our advisory dedicated to helping readers spot the best investment opportunities in the emerging legal cannabis market in the U.S.

But my old-school wife hasn't fully embraced this lifestyle change yet...

She talks about my involvement with medical-cannabis investing in hushed tones. Whispers. Barely audible. She warns the kids to "never tell your friends what Dad does."

I find it charming. And it's why what she did recently was so amazing to me...

Out of the blue, my wife made a special trip to a cannabis dispensary near our home in Maryland. She went in and bought some cannabidiol ("CBD") oil. She wanted something that might help our dog be a bit less crazy... something to calm her down and keep her from barking at everyone who walks by our house.

It caught me off guard. But then I thought about it for a few minutes. And I realized that her unexpected trip is a fantastic example of the state of cannabis investing.

Public opinion is rapidly changing in favor of cannabis...

In 2000, polling and analytics firm Gallup released data that showed 31% of people surveyed believed cannabis should be legal. Last October, the most recent survey on the same topic showed the percentage had more than doubled in 18 years to about 66%.

In other words, like my wife, many Americans now accept the use of cannabis. It's talked about more in the mainstream media and on television, too...

For example, back in October, former surgeon and current TV host Dr. Mehmet Oz discussed "The CBD Oil Boom" on an episode of The Dr. Oz Show.

CBD is one of more than 100 elements found in the cannabis plant. It's one of the two best-known active components, along with tetrahydrocannabinol ("THC").

But unlike THC, CBD is not psychoactive... meaning it won't get you high. It's widely believed to be a natural remedy for pain, anxiety, sleep, and other conditions. Growing evidence shows that CBD may play an effective role in reducing epileptic seizures, too.

In February, Martha Stewart – the well-known businesswoman and TV show host – announced that she's partnering with the largest cannabis company in the world, Canada-based Canopy Growth (CGC), to help develop a new line of CBD-related products. As Canopy Growth co-CEO Bruce Linton said in a news release at the time...

As soon as you hear the name Martha, you know exactly who we're talking about. Martha is one of a kind and I am so excited to be able to work alongside this icon to sharpen our CBD product offerings.

And just a couple of weekends ago, CBS Sunday Morning featured a story on CBD. Keep in mind... This is a popular news show that airs on network television at 9 a.m. on Sundays.

Those are just a few examples... I could name many others. Shifting sentiment will continue to drive the potential of this already large market even higher...

That potential makes cannabis one of the most interesting growth markets for investors right now. And in today's Digest, I want to cover three catalysts that could create a tremendous opportunity for folks who put money to work in cannabis in the months ahead...

1. More lawmakers are supporting bills that favor the industry
2. A flurry of deals in the space will likely get faster from here
3. Joe Biden could provide a massive boost for these stocks

The probability of loosening cannabis rules at the federal level has never been greater...

In late March, the U.S. House of Representatives Financial Services Committee approved the Secure and Fair Enforcement ("SAFE") Banking Act by a 45-to-15 vote. It marked the first time a bill directly related to cannabis banking was approved by a congressional committee.

This is a huge step in legitimizing the cannabis industry. In the March 28 Digest, Justin explained why it's so important...

In short, because cannabis remains illegal on the federal level, most banks have been unable (or unwilling) to work with businesses in the industry.

As a result, even many of the biggest and most successful legal cannabis companies still don't have access to the basic banking services most industries take for granted today. This includes everything from checking accounts to loans and credit cards to payroll services.

Instead, most still operate as cash businesses, which is not only a logistical nightmare but a huge public safety concern as well.

Whether or not one believes cannabis should be legalized on the federal level, there's simply no logical reason for this. If a business is operating legally in a particular state, it should also have access to financial services in that state.

Next, the bill will go before the full House for a vote. If the SAFE Banking Act becomes law, it would allow banks to provide financial services to legally licensed cannabis companies.

Meanwhile in the U.S. Senate, the Strengthening the Tenth Amendment Through Entrusting States ("STATES") Act continues to attract attention and controversy...

Senators Elizabeth Warren, a Democrat from Massachusetts, and Cory Gardner, a Republican from Colorado, first introduced the bill last summer. It would give states the ability to regulate cannabis themselves – and prevent federal enforcement. It would amend the Controlled Substances Act of 1970, essentially removing cannabis from the law.

And like the SAFE Banking Act, this bill also addresses the problems with financial services. It specifically says that compliant transactions are not considered trafficking.

A weakness in the bill is that it doesn't offer any benefits to people already in prison on prior cannabis charges. Any new legislation must contain a civil rights element to address this issue. In our view, that will be a critical factor in negotiations as supporters try to pass a final bill. We'll keep an eye on this situation as it develops in the weeks and months ahead.

Keep an eye on Mitch McConnell, in particular...

The cannabis industry needs McConnell's support.

As the Senate majority leader, McConnell controls what bills the legislative chamber votes on. If he doesn't like a bill, it will never see the light of day. And of course, McConnell holds tremendous influence with other Senate Republicans. His support will sway others to back a bill. Unfortunately for the cannabis industry, his views on the topic are wishy-washy...

The longtime conservative politician emerged last year as a somewhat surprising supporter of the 2018 Farm Bill. Among other things, the bill – officially known as the Agriculture Improvement Act of 2018 – legalized hemp, the plant from which CBD is primarily sourced.

McConnell's home state of Kentucky will benefit tremendously from hemp. Last month, Kentucky Commissioner of Agriculture Ryan Quarles told news network CNBC that cultivation of the crop in the state will more than triple in 2019 – from 16,000 acres last year to more than 50,000.

This is just the start of federal decriminalization...

Other bills in both the Senate and the House will soon gain traction. It's only a matter of time... I believe we'll see major advancements at the federal level in 2019 and 2020.

Meanwhile, we've already seen several billion-dollar deals in the cannabis space...

That's a great sign.

In the second half of last year, companies struck four major deals. You might've already read about them in the financial press, but I'll run through them quickly...

In early August 2018, Molson Coors Brewing (TAP) – the fifth-largest beer company in the world – announced a joint venture with Canadian cannabis producer Hexo (HEXO) to partner on creating nonalcoholic, cannabis-infused adult beverages.

Later that month, Constellation Brands (STZ) – which makes Corona beer and Robert Mondavi wine, among others – announced a $4 billion investment in Canopy Growth.

Then in December, cigarette giant Altria (MO) reached a $1.8 billion deal with Cronos (CRON), a Canadian cannabinoid producer and seller. And finally, leading global brewer Anheuser-Busch InBev (BUD) reached a deal just two weeks after that with Tilray (TLRY) to also develop cannabis-infused adult beverages.

These are important, front-page headlines. They create major legitimacy for cannabis.

And now, we're beginning to see consolidation within the cannabis industry...

A month ago, Canopy Growth announced that it would pay $3.4 billion for competitor Acreage (ACRGF). As Justin explained in the Digest at the time, this is a big deal...

You see, Canopy Growth is a Canadian company, while Acreage is U.S.-based. Remember, the U.S. is the biggest cannabis market in the world... And yet, cannabis remains illegal on the federal level.

Most important, this deal will only happen if the U.S. moves to legalize cannabis nationwide. In other words, Canopy Growth just placed a massive bet that this will eventually occur.

The deal-making continued at the beginning of this month... On May 1, Massachusetts-based Curaleaf (CURLF) announced the biggest acquisition in U.S. cannabis history when it agreed to buy private competitor Cura Partners' Select brand in an all-stock deal worth around $1 billion. This deal is important, too...

I believe it will mark the start of a period of significant consolidation in the U.S. market.

As a result, it should provide a floor for valuations of companies in the space. If investors believe certain companies could be up for sale, these companies' valuations will be supported at higher levels than normal. That will provide some downside protection for investors.

We're just scratching the surface... I expect to see more deals as support for the legalization of cannabis at the federal level picks up in the months ahead.

And that brings me to the final reason why I believe we could see incredible gains in the cannabis space in the near future...

As the 2020 presidential election gets closer, voters will want to know candidates' views on cannabis...

Today, 23 candidates have announced that they'll seek the Democratic nomination. And while the candidates' opinions on cannabis aren't all the same – ranging from simply loosening current regulations to full legalization – they're all supportive. Except one...

Former Vice President Joe Biden.

Biden, who represented Delaware in the U.S. Senate for more than 35 years before becoming Barack Obama's running mate in 2008, has a long and well-documented legislative history against illegal drugs. And more important, his battle against "evil substances" put cannabis squarely in the crosshairs.

This stance puts Biden at major odds against all his competition in the Democratic primary. It will give his opponents a powerful weapon to try to turn voters against him.

Here's why I believe Biden will likely soften his previous tone on cannabis...

First, Biden spent most of his life in two states that have robust medical cannabis programs – Delaware and Pennsylvania, where he was born and currently works as a college professor.

Plus, Biden passionately cares about an initiative that he calls the "Cancer Moonshot" – an all-out war on cancer through enhanced research, funding, and clinical trials. And don't forget the 2015 death of Biden's son, Beau, to brain cancer. This personal tragedy likely played a big role in the development of Biden's Cancer Moonshot initiative.

Guess what has shown to be therapeutic in the treatment of side effects related to cancer medication, as well as the tumors themselves? That's right... cannabis.

Now, I don't expect Biden to completely change his opinion overnight...

It will happen slowly. Remember, he has been staunchly against cannabis for decades. But when he changes his tune, all the financial and news media outlets will jump on it.

This sharp contrast to his well-established opinion will be in headlines everywhere. It'll be the type of unexpected event that demonstrates a major shift in sentiment toward cannabis and related stocks – kind of like my wife's recent trip to the dispensary was to me.

The only difference is that Biden's decision will have a much greater impact than my wife's. Changing his long-held views on cannabis could push related stocks significantly higher in a short amount of time.

In the months ahead, I'll follow Biden's views on cannabis closely – as well as the shifting public sentiment, the proposed bills in Congress, and the uptick in deals across the industry. And I'll be sure to keep my Cannabis Capitalist subscribers up-to-date on the best ways to profit as these trends play out.

If you aren't already a subscriber, I have good news...

For a limited time, Digest readers can take advantage of a special offer. You can sign up for Cannabis Capitalist today at 35% off the regular price. Get all the details right here.

New 52-week highs (as of 5/16/19): American Express (AXP), Axis Capital (AXS), Hershey (HSY), Match Group (MTCH), Nestlé (NSRGY), NVR (NVR), PepsiCo (PEP), Procter & Gamble (PG), Starbucks (SBUX), T-Mobile (TMUS), Travelers (TRV), Wells Fargo – Series W (WFC-PW), and W.R. Berkley (WRB).

The feedback on this week's Bear Market Survival Event continues to roll in. What's on your mind? Let us know at feedback@stansberryresearch.com.

"I feel the Bear Market Survival Event was the best presentation you have produced.

"I won't be subscribing as I'm still recovering from a 25% loss last year. Unfortunately, I sold on December 24 when losses crossed my ability to sleep at night levels. I am a lifetime subscriber to Stansberry's Investment Advisory and True Wealth Systems, so I'm not going anywhere. Currently I'm making select purchases and selling options." – Paid-up subscriber Rex P.

"Great presentation!" – Paid-up subscriber Ed K.

"In my medical practice I constantly remind myself not to miss the big stuff which hides behind the small stuff. A small thing by itself doesn't make a diagnosis, but a lot of the small things sure may. I think that was one of the most important points from [this week's] presentation." – Paid-up subscriber N.B.

Regards,

Thomas Carroll
Baltimore, Maryland
May 17, 2019