Ho ho ho, December away we go! Yesterday I left you with the idea that ‘green’ energy was a thematic to back for the next decade. It seems to be the appropriate colour elsewhere too!
The other sector I’m excited about right now is cannabis. I’ve been saying this to my paid subscribers for a while now. There’s still a lot of potential upside here.
If you go back to, say, August, you were standing in the ashes of a sector crushed since the boom of 2017. No cannabis stock escaped the wrath of investor and trader disappointment.
That was great news to me. It meant all the blue sky had been smashed out of the stocks and then some.
And yet the opportunity around cannabis — the excitement and scale that drove the boom in the first place — hasn’t gone away.
It’s just that new industries take time to develop. Regulations need to be put in place. Studies need to be financed and conducted. None of this happens in a heartbeat.
One of the advantages of this gig is you see how often, and how long, things move in a big circle. Sectors go from undervalued to overvalued and back again.
One of the things that kept me from buying in at the top of the gold stock rally in August was the knowledge it had been going on since 2018.
There is a limit to how far any one sector can keep running before everyone is already in.
At some point there’s no one left to buy and it only takes a bit of drawdown — like now — to shake out all the weak hands that came late to the party.
ASX Cannabis Stocks Making a Comeback
I’m sure gold stocks will have their time in the sun again. But back in August I was picking over cannabis stocks, not gold.
I was one of the few. I can say that because I attended a webinar for one of the cannabis stocks. As far as I could tell, there were only three other people attending.
I remember remarking on it to my brother-in-law at the time. Three? For a company I consider the premier opportunity in this space on the ASX. That stock is now up 50% since August and I think there’s plenty more to come.
You would have no inkling of the opportunity if you did nothing but look at the chart of the stock. It was way down off its all-time highs and crawling along doing nothing.
The Aussie market, in the short term at least, is heavily influenced by traders using technical analysis.
There’s an advantage in that for those prepared to do some homework. You can get set in a stock before they switch on that something is happening.
You do need the courage of your convictions though. One of the reasons people find technical analysis appealing is that it allows them to suspend judgement and personal bias and ‘go with the market’.
That’s fine. I’ve done it myself. But crowded trades can become dangerous. I always prefer to think in terms of risk versus reward.
The cannabis stocks were previously so hammered that the upside was way larger than the potential downside, absent some terrible wildcard.
That was August. This is December. Liquidity and interest has returned to some of the names here.
Cannabis stocks are catching a bid in the US, which is, in turn, leading the Aussie names up too.
I don’t think many people appreciate Australia is a leading player in this industry globally. It’s great to see us exporting value added products here.
Think of how the Australian wine industry took the world by storm. Why can’t we do we the same with cannabis? Of course we can!
By the way, I’m referring to medicinal cannabis here. There’s much more important research to be done here on the benefits and risks of this as a treatment.
But there are plenty of people suffering that carry great hope for what it can do for them.
The world is desperate for an alternative to opioids and their addictive qualities. Can cannabis help fill this breach? The payoff could be huge if it can. It’s worth some of your time to think about it.
Best wishes,
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Callum Newman,
Editor, The Daily Reckoning Australia
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*** A final note of warning from the Group Publisher ***
What will Australia’s place be in the global renewable energy step-change over the coming decade?
And which stocks and industries are mostly likely to benefit?
Tomorrow, we release our vision.
It’s the culmination of months of work.
And it’s a decidedly left-field take compared to what’s being trotted out by the mainstream media.
I’m almost certain the stocks we’re going to shine a light on are ones you’ve never heard the names of.
All I ask is this: Before we drop the research, starting tomorrow:
Park any scepticism you might have at the gate.
You might well believe this green energy boom is a bit of a mania. That fossil fuels won’t just go quietly into the night…and that our roads will growl and pop to the sound of the great V8 for years to come.
Fine. You can hold that view…and STILL benefit greatly from the story we’re going to break this week.
Like it or not, a once-in-a-lifetime money migration has been set in motion.
It’s a migration that will have second-order consequences.
You’re already seeing these manifest in certain stock prices.
But it’s just the very beginning.
The idea is to do your best to foresee, measure and put a dollar value on these second-order consequences. And give yourself the best possible chance to make money from them.
The stocks we’re going to profile give you a great shot at doing exactly that.
While they are inherently risky, they’re optimal buys right now if you’re a speculator.
But even if you’re not…this is a story you need to hear.
Tune in tomorrow for Australia’s Green Energy ‘Second-Order Effect’…
Cheers,
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James Woodburn,
Group Publisher
PS: Our publication The Daily Reckoning is a fantastic place to start your investment journey. We talk about the big trends driving the most innovative stocks on the ASX. Learn all about it here.
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