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March
10
2018

Big Alcohol Hasn’t Been This Scared Since Prohibition
Justin Spittler

Big alcohol is terrified of marijuana.

I don’t mean alcohol executives have watched the propaganda film Reefer Madness one too many times… I say this because marijuana is a grave threat to their business.

Even Molson Coors admits this. Coors is one of the largest U.S. beer companies. It sells the popular brands Blue Moon and Miller Light (among many others).

And it recently identified marijuana as one of the biggest threats to its business. Here’s a direct quote from its latest annual report published on February 14:

Although the ultimate impact is currently unknown, the emergence of legal cannabis in certain U.S. states and Canada may result in a shift of discretionary income away from our products or a change in consumer preferences away from beer.

In other words, Coors thinks its customers will smoke more marijuana and—as a result—drink less beer. That’s obviously bad for business. 

• Coors isn’t the only major beer company worried about this, either… 

Boston Beer, the parent company of the popular Sam Adams brand, recently said that marijuana could eat away at its business. The same goes for Craft Brew Alliance, which makes Kona and Omission beers.

These companies have good reason to be nervous, too.

After all, marijuana legalization is sweeping the nation. Medical marijuana is now legal in 30 states and the District of Columbia. Recreational marijuana is legal in eight states.

Not only that, recent research by University of Connecticut and Georgia State University found that alcohol sales fell 15% in a number of states that introduced medical marijuana.

• It’s now only a matter of time before marijuana is legal at the national level… 

Now, I realize some readers don’t want to hear that. That’s because a lot of folks think marijuana is dangerous to society. Some even think it’s evil.

But I didn’t write this essay to argue in favor of or against marijuana legalization. At this point, that’s frankly a pointless discussion.

And that’s because marijuana legalization is happening whether you like it or not. The movement simply has too much momentum at this point. It’s a runaway freight train.

Coors obviously thinks so, too. If it didn’t, it wouldn’t have called marijuana a major threat to its business.

That alone should get you curious about investing in marijuana. But many investors are still nervous about investing in pot. And there are a number of reasons for this… but one of biggest ones is recent price action.

• We just saw a huge pullback in marijuana stocks… 

The U.S. Marijuana Index fell 36% between January 23 and February 27. Many individual marijuana stocks fell even more. We’re talking declines of 50% or more in a matter of weeks.

This “crash” has freaked out a lot of investors. I know because nervous readers have been flooding my inbox lately. They’re asking me if the marijuana boom is over.

Cannabis stocks have tanked almost every day since the Sessions comments. I have a long-term perspective on equities. I understand all stocks carry risks, but any current thoughts or outlook on this sector? —Joe

I invested in marijuana stocks. Since it has dropped some 30%, what is the Casey recommendation now? Hold or cut losses? Please advise. —Clara

Marijuana stocks are taking a beatdown. I understand they are high-risk, but are there any new discoveries that would change your outlook? —Dave

I understand all of these concerns. But you must understand a few things…

• Number one: this recent pullback is perfectly normal…

Remember, marijuana stocks have been on a tear over the last year. They’re still up big since we initially told you about this opportunity.

The North American Marijuana Index surged 233% between last June and this January. 

After a run like that, pullbacks aren’t just normal. They’re healthy. They allow a market to catch its breath before climbing higher again.

I know because I’ve spent the last year researching the marijuana industry around the clock.

But I haven’t just sat at my desk like other “experts.” I’ve gone to the frontlines of the global marijuana boom.

I’ve been to Vancouver, San Francisco, and Denver. Along the way, I’ve met with marijuana venture capitalists, CEOs of multinational marijuana companies, and even master growers.

This “boots on the ground” research has helped me understand how the marijuana industry really works.

• Number two: we at Casey Research never encouraged you to buy marijuana for short-term gains…

Instead, we recommended them as a long-term speculation.

Still, it’s easy to lose faith in a speculation when it doesn’t do what it was “supposed” to do or what you thought it “should” do.

But the best investors know that you can’t let minor setbacks shake you out of a quality investment. Instead, marijuana investors need to be patient. They need to focus on the big picture… and the future for the legal marijuana market is as bright as ever.

So if you own marijuana stocks or have been thinking about buying them, here’s what I suggest you do.

Don’t panic or obsess over daily movements. Marijuana stocks are volatile. That’s just what you get when you invest in an up-and-coming industry.

Use down days as buying opportunities. This way you can start to build positions in quality stocks.

Use proper position sizes. This one is crucial. You see, I’ve been getting emails from subscribers about how they’re down huge sums of money due to the recent pullback in marijuana stocks. We’re talking tens of thousands of dollars. 

Now, I don’t know these people’s financial situations. But I’m going to go out on a limb and say that they probably shouldn’t have wagered that much money on marijuana stocks. So, be sure to only bet money that you can afford to lose.

Investors who follow these simple steps will set themselves up for huge gains… without exposing themselves to harmful losses.

Regards,

Justin Spittler
Tulum, Mexico
March 8, 2018

P.S. Be sure to keep an eye out for part two of this story. In it, I’ll tell you how Coors is likely to fight back against big marijuana. As you’ll see, this is a huge opportunity for investors… and one of the best reasons to buy marijuana stocks right now.

 

Originally from Omaha, NE, Justin attended Loyola University New Orleans College of Business. After graduating with degrees in management and economics in 2011, Justin worked several years as a commercial real estate appraiser in New Orleans.

While serving as an appraiser, Justin joined Casey Research as a part-time analyst and contributing writer before becoming a full-time analyst in March 2014.

Justin is currently the editor of The Casey Daily Dispatch.

 

www.caseyresearch.com