Tired of Bitcoin? Check Out Marijuana Stocks
Bitcoin is the word on most people’s lips, but maybe it’s not your cup of tea. Maybe it makes you nervous.
After all, how can an asset without income or cash flows be worth so much? It could be a bubble; it must be a bubble.
If that’s how you feel, try taking a closer look at marijuana stocks.
Now, I understand if you have moral objections against marijuana. If those feelings outweigh the chance to make millions of dollars, please exit this article. But first, let me remind you that marijuana stocks aren’t alone in the “sin stocks” category.
What about liquor? Or gambling? Or tobacco? Sin stocks are as old as the markets themselves, my friend. That much is obvious when you study markets for a few years.
Some of these investments surged by 200%, 300%, or even 400% since the start of 2017. And you’d be investing in real companies that actually produce something.
Now don’t get me wrong, I am quite bullish on cryptos.
We provide daily coverage of them on Profit Confidential. But the equity analyst within me craves a good ol’ fashioned stock that could skyrocket by triple-digits because the market is underestimating its potential. I miss the thrill of the hunt.
And so I took some time to dig through our past reports on marijuana stocks…
Hidden in the pile was a stunning report from my colleague Patrick Brik. He is a world-class technical analyst and someone whose opinion I deeply respect.
In his report, Patrick profiles an incredible marijuana stock that is growing.
Let’s take a closer look.
The American Express of Pot Stocks
Hydropothecary Corp (OTCMKTS: HYYDF, CVE: THCX) is the company in question.
It is a licensed medical marijuana provider, though far from the biggest in Canada. The potential for the company exploded when it became clear that Canada will legalize recreational marijuana on July 1, 2018.
Chart courtesy of StockCharts.com
Once this starting gun is fired, cannabis companies will race to conquer the newborn industry. But unlike a traditional race, there may be more than one winner.
For example, a volume seller might win by shipping your average, everyday product in droves. Meanwhile, a more luxury brand could sell one-fifth that amount at much higher margins. Both are successful, just in different ways.
American Express Company (NYSE: AXP) is a great example of this phenomenon. Its market share is much smaller than either Visa Inc (NYSE: V) or Mastercard Inc (NYSE: MA), but its brand oozes sophistication and exclusiveness.
Believe it or not, people are willing to pay extra for this feeling of exclusivity. It may seem bizarre to those of us who judge things based on price and intrinsic value, but many people are wired to place social status above reason.
Marketers are keenly aware of this psychological trait, which is why luxury brands exist in the first place.
Hydropothecary is the luxury brand of marijuana. It pays a great deal of attention to customer service, much like American Express, because it wants customers to feel special. To feel as if their concerns are taken seriously.
As a result, Hydropothecary can charge higher prices.
For example, in its last quarter, Canopy Growth Corporation (OTCMKTS: TWMJF, TSE: WEED) sold cannabis for an average price of $7.05 per gram. (Source: “Canopy Growth Corporation Reports Second Quarter Fiscal 2018 Financial Results as it Expands Infrastructure for Canadian and International Markets,” Cision, November 14, 2017.)
By contrast, Hydropothecary sold at an average price of $9.00 per gram in its last quarter. (Source: “Hydropothecary Announces Financial Results for the Fourth Quarter of 2017 and Fiscal 2017,” MarketWired, November 2, 2017.)
But that’s not the only reason to be bullish on Hydropothecary. Here is a quick look at its recent highlights:
- The company gained seven new partner clinics, bringing its total network to 101
- It began construction on a 300,000-square-foot facility, which will be completed in July 2018 (excellent timing, I might add)
- It hired a former provincial Minister of Health to its C-Suite
- It lowered cash costs for inventories by 32%
- Total shipments increased 203% to 404,158 grams
As you can see, this company is gearing up for full-scale legalization. It is unlikely to become the biggest marijuana player, but we still believe there is tremendous potential for it to carve out a luxury niche. As such, we are incredibly bullish on its share price.