The past year has been very fortunate to me.
I remember last October I was looking at bitcoin’s chart and became convinced it was forming a new exponential curve. So I jammed some money into it.
After it went up a bit, I noticed the same curve starting to form in the No. 2 crypto, Ethereum. So I took some profits from BTC and plugged them into ETH.
And I just kept following that same script. It worked so well, I decided to throw $20k into popular joke currency Dogecoin when it hit a penny in January. A month later, I sold it for $0.07. It’s the best trade I’ve ever made.
But I’ll tell you what… I still clearly remember the cryptocurrency bull market in 2017 and the crash that followed in 2018.
What‘s crystallized in my memory is when Ethereum dropped all the way to a hundred bucks. It’s now worth roughly $4,000.
I even remember looking at it back then and thinking man, this thing is way too cheap.
And I did absolutely nothing about it.
We’ve all been through an experience like this, where something was obvious in hindsight but for whatever reason, we refused to act at the time.
Fortunately, there is still one major market where I believe we can see these kinds of 1,000%+ gains from virtually every asset in this class.
That brings me to my prediction for 2022, and how I’m going to act on it.
Now’s the Time for Pot to Take Off
Full disclosure, I’m not a huge fan of making predictions like this. As I’ve reminded you many times, I’m not a financial expert. I’ve just learned from the experts well enough that I’ve gotten very, very good at trading on my own. Which is the same fate I wish for all of you.
However, I believe there is a good chance 2022 will bring the next long-awaited bull market in pot stocks.
As you may remember, the last bull market happened in 2017 alongside bitcoin. I remember when Tilray (TLRY) first went to market, I bought a few shares and sold some for a 500% gain before the thing crashed over 90%. It was fun!
But really, that was chump change…
Some pot stocks soared well over 1,000%, 10,000%, and even 100,000% on pure speculation.
This is common in hype phases. Pot was basically a new industry to the stock market, and people were betting on its long-term future way too early.
Since then, it’s been in a seemingly never-ending bear market, with the leading stocks falling much, much lower than I ever anticipated.
But I’m not concerned. As we’ve seen in bitcoin the past year, the second bull market — when the technology and industry has reached better maturity — can be way, way bigger.
So why am I convinced now’s the time?
Well, there are three reasons.
A Lowkey Value Story
First, pot stocks are way too cheap.
In an era of absurd stock valuations, it’s one of the few, if only, key markets left that presents strong value. You might say the same thing about oil and airlines. But again, I’m looking for 1,000% gains, not 100%.
Just take a look at one of the industry’s largest companies, Canopy Growth (CGC).
The stock went public in 2018 and peaked at $51 per share. It’s now about $10 per share.
Meanwhile, sales in 2017 were just $39.9 million. In 2018, they doubled to $77.95 million. And today, they’re $546.65 million.
So that’s 1,270% sales growth while the stock has fallen over 80%… For a business that’s likely not going away, that screams “cheap” to me.
This brings me to my second point.
A Maturing Marijuana Industry
Pot companies are significantly more mature going into 2022 than they were five years ago.
That’s because more Americans are using pot than ever before.
Legal recreational marijuana sales have doubled in the last two years from $7.4 to $14.9 billion. And they’re on track to grow to $25.1 billion by 2025. I’m willing to bet that’s a conservative estimate.
And that’s just recreational sales. Sales of medical marijuana are projected to triple by 2027 with a compound annual growth rate of 19.7%, reaching north of $87.4 billion.
You can tell the market leaders are preparing for something big. Aurora Cannabis (ACB) has made 11 acquisitions in the past five years. Canopy has made 18. Tilray has captured 16% of the Canadian market and says more acquisitions are on the way.
Ok, so pot stocks are cheap and the industry is growing like, well… a weed.
What’s my third point?
Washington’s Getting on Board
I believe the legislative environment is better than ever.
93% of Americans are in favor of legalizing medical marijuana. Two-thirds of Americans support legalizing recreational use — including 54% of Republicans.
Medical is legal in 37 states, four out of five U.S. territories, and Washington, D.C.
18 states have legalized recreational use, while only 13 remain where it is illegal.
When you include CBD oil, marijuana is fully illegal in just four U.S. states.
Georgia has already decriminalized possession of up to an ounce of weed in major cities including Atlanta and Savannah.
A Republican representative from South Carolina has introduced a bill to decriminalize it at the federal level.
In Texas, pot prosecutions are down. In Idaho, residents are pushing hard to get legal pot on the ballot in 2022. And legal medical in North Carolina is almost a guaranteed shot.
Friends, I believe we’re at the tipping point.
I can’t say for sure whether full federal legalization will happen next year. Most of the industry agrees it won’t.
But anything’s possible.
With medical legal in three-fourths of U.S. states, and recreational legal in over a third, I believe we could finally see a new bull market in pot stocks as we march toward the 2022 midterm elections.
I believe it will be a rising tide that lifts all boats in both the U.S. and Canada, particularly for stocks that are listed on the NYSE and Nasdaq.
Here is a list of 10 pot stocks I believe could rise 1,000% in 2022:
- Tilray Inc. (TLRY)
- Aurora Cannabis (ACB)
- Canopy Growth (CGC)
- Cronos (CRON)
- Sundial Growers (SNDL)
- OrganiGram (OGI)
- HEXO (HEXO)
- IM Cannabis (IMCC)
- FSD Pharma (HUGE)
- India Globalization Capital (IGC)
Full disclosure, I either own or have recently sold all 10 of these stocks with the intention of repurchasing after 30 days so I can lock in some capital losses.
I plan on buying quite a bit more in 2022.
I truly believe buying pot stocks today is liking buying bitcoin for $3,000 and Ethereum for $100. Remember, virtually all other stocks are valued high across the board. When this stuff takes off, it may be the last bull market of its kind you ever see.
Ciao,Chris Cimorelli Chief Editor, True Options Masters