Published on March 14 2018

Why Coors Has to Turn Itself Into a Marijuana Company

By Justin Spittler, editor, Casey Daily Dispatch

Coors will fight back.

It has no choice. If it doesn’t, it will get eaten alive by Big Marijuana.

If you read last Thursday’s Dispatch, you know what I’m talking about. In short, Coors admitted that marijuana is a major threat to its business in its latest annual report. And it’s absolutely right.

Marijuana is stealing customers from Big Alcohol companies left and right. In fact, a recent study found that alcohol sales fell 15% in states that introduced medical marijuana.

So, you can see why Coors is nervous. But here’s the thing. Coors can’t afford to just sit back. It will have to defend itself.

In the past, it might have hired lobbyists to stonewall marijuana legalization. But it’s too late for that.

Marijuana legalization has taken the country by storm. Around 95% of Americans now live in states where medical marijuana is legal. And 21% of Americans live in states where recreational marijuana is legal.

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

In short, there’s no point fighting marijuana legalization. It cannot be stopped.

So, I predict Coors will do the next best thing. It will turn itself into a marijuana company.

I know that’s a bold call. But it’s not as crazy as it sounds. After all, one of its biggest competitors is already doing that.

• In October, Constellation Brands bought a 10% stake in Canopy Growth…

Constellation is the third-largest beer supplier in the U.S. It makes the popular brands Corona and Modelo. It’s also the world leader in premium wine.

Canopy, on the other hand, is the largest marijuana company on the planet. It serves more than 60,000 medical marijuana patients in Canada.

The deal was worth $191 million, making it one of the biggest marijuana deals ever. Constellation CEO Robert Sands explained why the deal was so important:

Our company’s success is the result of our focus on identifying early-stage consumer trends, and this is another step in that direction.

Mr. Sands is right, too.

• Legal cannabis 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.

In other words, marijuana isn’t just a threat to the beer industry. It’s also an opportunity.

That’s why I expect Coors and companies like it to follow Constellation’s lead. They’ll start making huge investments in the marijuana space.

There’s simply too much money on the line.

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• So, expect to see a lot more marijuana mergers and acquisitions (M&A)…

We’re actually already starting to see an explosion of deal-making in this space.

According to Mergermarket, there were at least 45 deals in the global cannabis market last year. The value of those deals totaled $1.69 billion.

That’s an all-time high… but that record won’t stand for long.

According to the Viridian Cannabis Deal Tracker, $1.23 billion went into marijuana deals and investments during the first five weeks of this year.

That nearly matches the total amount of investments in 2016. It’s also 600% more than the $178 million that was raised in the first five weeks of 2017.

• You cannot ignore this as an investor…

Because you can make enormous sums of money by getting in front of these kinds of deals.

The Constellation–Canopy deal is a perfect example of this. The day that deal was announced, Canopy’s share price surged 19%. It’s now up 254% since Crisis Investing editor Nick Giambruno recommended it in August.

And that’s just one deal. Other marijuana companies have soared 20%… 30%… even 40% in a single day on the news of a takeover. That’s more money than most investors make in a year.

But don’t worry if you missed out on these takeovers.

• The marijuana industry is still very young…

It’s also highly fragmented. In fact, there are only a small handful of blue-chip marijuana stocks today. And none of them are household names yet.

This means we’ll see a lot more consolidation in the marijuana space in the coming months. A lot of this money will come from Big Alcohol companies like Coors.

But they certainly won’t be the only companies gobbling up marijuana assets.

Big Pharma and Big Tobacco will also get involved in this takeover mania. Of course, regular readers have known that for months.

That’s because Doug Casey predicted an explosion in marijuana deal-making months ago. Here’s what he told readers of The Casey Report back in October:

Someday—not far in the future—you’ll see a takeover mania in the area…

My guess is that as cannabis becomes fully legal in all its forms in the years to come, big food and drug companies will take over the leading players—at a big premium.

• Once again, Doug nailed this call…

Medical marijuana producer Aurora Cannabis acquired CanniMed Therapeutics for $857 million. Another medical marijuana company, Aphria, bought Nuuvera for $670 million. And Aphria is now in talks to buy Broken Coast Cannabis for $185 million.

These are big-time deals.

But they’re going to look like small potatoes once Big Alcohol, Big Tobacco, and Big Pharma get in on the action.

Once that starts happening, the irrational fears keeping many investors on the sidelines will get swept away.

So, consider investing in marijuana stocks if you haven’t already. Just be sure to do a few things before diving in…

Do your homework. Study a company’s business model before investing in it. Get to know its management team. If a marijuana stock sounds too good to be true, it probably is. Don’t buy a marijuana stock on a whim or hot tip. I covered this idea here.

Be disciplined. Only speculate with money that you can afford to lose. You don’t need to put a lot of money into marijuana stocks to make a fortune in the months ahead.

Be patient. Remember, the marijuana industry is still very young. There’s also a lot of uncertainty surrounding the industry. And that’s a recipe for volatility. So, be patient and don’t obsess over day-to-day moves.

Regards,

Justin Spittler
Tulum, Mexico
March 14, 2018

P.S. As I said, marijuana is the fastest-growing industry on earth. But most people still don’t know the best stocks to invest in.

Nick Giambruno has a basket of the top marijuana companies set to soar in the coming years. You can access these names—along with all of his research on the sector—with a subscription to Crisis Investing. Click here to learn more.


Chart of the Day: Take Caution From Here

By Joe Withrow, analyst, Casey Research

The U.S. stock market has never been this expensive relative to the size of the U.S. economy.

Today’s chart measures the market capitalization of the Wilshire 5000—an index that tracks nearly 3,500 of the largest U.S. stocks—against U.S. GDP.

As you can see, the current market value of U.S. stocks is 43% higher than GDP… the highest valuation in modern history.

According to historical data, this is bad news for stock investors.

Historically, higher stock valuations correlate with lower long-term returns… and lower stock valuations correlate with higher long-term returns.

The previous peak was in 2000… but the sky-high stock valuations didn’t last long. In fact, the stock market proceeded to fall 49% over the next two years.

Now that doesn’t guarantee that stocks will go lower from here… but caution is warranted.

As we suggested last week, it’s a good idea to lighten up on your weakest positions… hold more cash than usual… and own physical hold-in-your-hand gold.

—Joe Withrow


Reader Mailbag

Today, a reader shares his thoughts on our essay “Trump Won’t Back Down… Here’s How to Protect Your Wealth”…

I don’t believe this will go far enough to become a trade war. Trump is merely creating more negotiating leverage by threatening tariffs. You see that with NAFTA negotiations between us, Canada, and Mexico. The same is true with regard to China and the EU trade negotiations. Trump will get better trade deals for the U.S. in the end.

– Steve

What do you think Trump’s recent tariffs mean for the future of America? Let us know here.


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