By Justin Spittler, editor, Casey Daily Dispatch
We just witnessed the biggest “drug deal” of our time.
…but it didn’t involve cartels or gangsters.
No, this deal was forged between two giant North American corporations—Constellation Brands and Canopy Growth Corporation.
Constellation is the third-largest U.S. beer company and owner of the popular Corona brand.
Canopy, on the other hand, is the world’s biggest cannabis company. It serves more than 55,000 medical marijuana patients in Canada.
Now this might seem like a strange pair. But this deal makes a lot of sense. In fact, Constellation basically had to make this deal. I’ll explain why in a second.
But first, let me say a few things about this blockbuster deal…
• Last Wednesday, Constellation announced that it will invest $4 billion in Canopy…
In exchange, Constellation will receive a 38% stake in the cannabis giant.
That makes this the biggest legal cannabis deal in history—by far.
Of course, this isn’t the first time that Constellation has invested in Canopy. In October, it paid $191 million for a 10% stake in Canopy…This new deal nearly quadruples Constellation’s stake.
• Canopy’s stock surged 35% the day after the announcement…
And it’s up 59% since then…
Canopy’s stock is now up 215% since Constellation first invested in it 10 months ago.
That’s an enormous move. But regular readers saw this coming from a mile away.
• I’ve been saying for months that Big Alcohol would enter the cannabis space…
In December, I told you that a “cannabis takeover mania is underway.” I said there would be a lot more dealmaking in the cannabis space.
In March, I told you “Big Alcohol hasn’t been this scared since Prohibition.” I showed you why the Molson Coors Brewing Company called marijuana one of the biggest threats to its business—and that it would soon have to turn itself into a marijuana company.
Then, earlier this month, I showed you that we were spot-on with our call—Coors announced that it entered a joint venture with The Hydropothecary Corporation, a Canadian cannabis producer.
Now, I didn’t write this essay to brag. I wrote it because I believe we’ll see many more deals like this in the coming months… and I want you to be ready for that.
After all, investors who get ahead of deals like this can make 20%… 30%… or even 40% in a day.
I’ll show you how to set yourself up for those kinds of gains in a minute. But let me say a few more words on the Constellation–Canopy deal.
• Constellation paid a fortune for its stake in Canopy…
I don’t say this just because Constellation shelled out $4 billion.
I say this because Constellation paid $4 billion and only got a 38% stake in Canopy. Let me explain…
Before the deal was announced, Canopy was worth around $5 billion. So, a $4 billion investment (plus the $191 million that it already invested) should have given Constellation a much bigger stake… but it ended up with less than half of the company.
This tells me Constellation sees an incredible opportunity in the legal marijuana market. Why else would it pay such a steep premium?
But don’t take my word for it. Constellation CEO Robert Sands said he pulled the trigger on this deal because cannabis is a “tremendous growth opportunity.”
And he’s right.
• Legal marijuana is one of the fastest-growing industries on the planet…
The U.S. legal marijuana market is already a $6.5 billion industry. And it’s expected to grow to $50 billion by 2026. That would make it nearly three times as big as the craft beer market.
But let’s be real.
• The legal marijuana industry isn’t just growing rapidly…
It’s eating Big Alcohol alive.
In fact, a recent study found that alcohol sales fell 15% in the U.S. in states that introduced medical marijuana. In states where recreational marijuana is legal, the decline is even more pronounced.
In other words, legal marijuana isn’t just an opportunity for Constellation… It’s a means of survival.
It’s not the only Big Alcohol company that’s come to this realization, either.
• The Molson Coors Brewing Company made its first big move into the marijuana industry last month…
As I said earlier, it announced that it’s entered a joint venture with The Hydropothecary Corporation.
Together, the two companies will develop non-alcoholic, cannabis-infused beverages for sale in Canada.
Heineken, one of the world’s largest brewing companies, is also turning itself into a marijuana company. In fact, its Lagunitas Brewing label recently launched a new brand that will specialize in non-alcoholic, THC-infused drinks. (THC is the compound in marijuana that gets people high.)
Of course, this is just the beginning.
• Soon, every major alcohol company will have no choice but to “go green”…
Now, some companies will try to create marijuana brands in-house. But most won’t. Instead, they’ll buy existing marijuana assets or pen deals just like Constellation and Molson Coors.
So consider speculating on high-quality marijuana stocks if you haven’t yet. These companies will be prime mergers and acquisitions targets in the coming years.
Just don’t wait too long to act…
• The marijuana industry is rapidly consolidating…
Viridian Capital Advisors recently reported that more than 145 mergers and acquisitions were announced in the U.S. and Canada during the first half of this year. That’s nearly twice as many deals as there were in the cannabis industry during the first half of last year.
This tells us demand for marijuana assets is skyrocketing. And that means other Big Alcohol companies will have to inroad into the marijuana space soon. If they don’t, they’ll get left behind.
• This is why I encourage you to speculate on marijuana stocks sooner rather than later…
Just be sure to do a few things before diving in:
Do your homework. Study a company inside and out before buying its stock. Learn about its management team. Also, don’t buy any marijuana stock on a whim or hot tip. If it sounds too good to be true, it probably is.
Use discipline. Only speculate with money that you can afford to lose. Don’t chase high-flying stocks. And stick to your stop-losses.
Be patient. The marijuana industry is still very young. A healthy dose of volatility is to be expected. So don’t obsess over daily swings.
August 21, 2018
P.S. Crisis Investing editor Nick Giambruno just released a brand-new video presentation that reveals even more proof that now is the time to bet on marijuana stocks.
You see, until now, 99% of the largest hedge funds and banks wouldn’t touch pot. That’s about to change… The “Trillion Dollar Mainstream Marijuana Takeover” begins as soon as November 6.
And Nick’s discovered three tiny pot companies that could be in the crosshairs of these big funds. Well-positioned investors could see gains of 7,500%… 9,329%… even 12,547% if these companies get taken over. Click here to learn more about this rare opportunity.
Chart of the Day: The Number of Banks Is Shrinking
By E.B. Tucker, editor, Strategic Investor
The number of U.S. banks continues to fall…
As you can see in the chart below, there are 65% fewer banks in the U.S. today than in the early 1980s.
That’s a dramatic decline… But I believe there will be half as many banks at the turn of the next cycle.
And it’s opening up a profit opportunity…
You see, earlier this year, President Trump signed a bill into law that reduces regulations on all but the largest U.S. banks. I believe this is just the beginning… It’s now only a matter of time before Trump repeals more Obama-era banking regulations.
This is obviously good news for banks—specifically regional banks, like the kind we own in my Strategic Investor newsletter.
It means they’ll spend less money on compliance, and more money on growing their businesses. They’ll become more profitable. As a result, they’ll have more cash to go out and acquire other banks.
This is one of the best setups I’ve seen for banks in my entire career.
Keep in mind, banks had excessive risk on their books going into the last crisis. The government caged them for 10 years. The Trump administration is openly saying it plans to set them free. This is a trend we don’t want to miss.
P.S. I just released a new video with more on why you need to own bank stocks today.
You see, in 2008—in one of the biggest cons in American history—taxpayer funds were abused by the bank bailout. Washington elites gave the mega-banks $245 billion.
The money you paid to Uncle Sam over the past 10 years went to ungrateful executives and their million-dollar yachts. And rather than return the favor… these bankers cut your income from savings accounts and CDs to nearly zero.
But now, American citizens can be “compensated” for this outrageous filching of our money. It’s through what I call “Bailout Compensation Checks” or “Comp Checks” for short… Click here to see how you can access yours today.
Today, a reader responds to Nick Giambruno’s recent essay: “Federal Hemp Bill Will Make This Niche Industry Surge”…
I love your article about CBD [cannabidiol] oil from industrial hemp. I agree 100% with what you have reported and have already invested in a few pot stocks. Like most pot stocks, they trade on the OTC exchange.
My wife is suffering from a neurological problem and since I haven’t found a doctor in my area that knows much about CBD, I found a company in Colorado that produces the CBD oil from industrial hemp. I have ordered a bottle to try. I’m hoping this is the miracle we are looking for.
As always, if you have any questions or suggestions for the Dispatch, send them to us right here.