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The state of the global economy has led to a number of the best investors and economists to predict a recession within the next 12 to 18 months.
As market volatility continues to increase, investors and money managers will continue to exit the stock market as they look for new investment opportunities that help preserve wealth.
Although volatility has increased, we continue to view one sector as recession proof and believe that this sector will be the best place to invest if there is a recession. This sector is cannabis and it is the fastest growing industry in the world.
Cannabis Will Create the Most Millionaires
Investors are rarely presented with the opportunity to invest in an industry poised to see incremental revenue growth for decades to come. The last time investors had this opportunity was during the tech boom, which created countless millionaires.
Over the last two years, the market has seen an increased amount of capital enter the cannabis industry. This amount of money entering the industry is not only larger but smarter too; these investors and firms are long-term holders that see the bigger picture.
We continue to view the cannabis industry as recession proof as it does not receive the same benefits as other industries. The cannabis industry is not even in the first inning of a multi-decade growth cycle and investors have an unprecedented opportunity at their fingertips.
How is it Recession Proof
In every depression or recession, consumers have continued to drink beer, eat chocolate, and smoke cigarettes. We do not expect this to change during the next depression or recession. The only change will be that consumers will have an option to smoke marijuana.
Cannabis is too profitable and the United States is in too much debt to every rollback legalization. The industry continues to make strides across the globe and companies have been able to prove that cannabis has medical benefits.
During the last two years, the market has continued to see more states legalize medical cannabis, while the amount of clinical data and support from high ranking individuals like Sanjay Gupta and the U.S. Surgeon General Vivek Murthy and organizations like National Institute on Drug Abuse and the National Institute of Health.
Follow the Money
We expect to see significant growth in the cannabis industry over the next year, and two sectors poised to benefit the most from this are the Biotech and Canadian Licensed Producer sub-sectors.
During the last two years, more than $200 million has been raised by companies levered to the cannabis industry. More than 90% of this capital has been by biotech companies and licensed Canadian medical marijuana producers.
Top Stocks to Buy
Currently, there are more than 300 publicly traded cannabis companies and we expect less than 10% to still be in business in three years. Due to the nature of this industry, investors must be selective and focus on companies that continue to execute on initiatives, which have management teams who want to create value for shareholders.
The Canadian medical cannabis industry is also growing at an impressive 10% per month and it now has more than 75,000 patients. Canada has announced plans to legalize recreational cannabis the spring.
The biotech cannabis stocks have found success with the cannabis plant and each company focused on this industry is leading first-of-its-kind initiatives. This fact makes the companies attractive acquisition targets for large cap biotech companies like Biogen Inc. (BIIB) or Gilead Sciences Inc. (GILD).
The stocks we are favorable on and would buy in the Biotech and Canadian Licensed Producer sub-sectors include:
- Biotech: GW Pharmaceutical (GWPH), Insys Therapeutics (INSY), Zynerba Pharmaceutical (ZYNE), and Cara Therapeutics (CARA)
- Canadian: Organigram Holdings (OGI) (OGRMF), Canopy Growth (CGC) (TWMJF), and Aurora Cannabis (ACB) (ACBFF)
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