Are Pot Stocks in a Bubble? Simply: No

In today’s Money Morning…so, how’s your knowledge of illegal substance paraphernalia?…bubbles are needed to filter the toxins…it isn’t a bubble when there are real companies making major moves forward…and more…

Right now we can hear high-octane whine of Formula 1 card. The Grand Prix is back in Melbourne!

The sound of an internal combustion engine spinning at up to 15,000 RPM makes us smile. And we can’t wait to get over and see this year’s all new F1 cars hammer around Albert Park.

And while we had all intention of writing about F1 technology today, we won’t. There are more pressing matters at hand.

In fact there’s a lot on our mind this morning. Too much for just one Money Morning. One of the ideas for today is a big — no, a huge positive. The other is not. In fact it’s a little sad.

As such, we’ve decided that today we’ll run with the positive, something to keep spirits high. And tomorrow we’ll hit you with the not-so-happy story…

Bubble and smoke

Have you ever used a bong, AKA a water pipe? You know, the paraphernalia used to smoke marijuana, weed? You don’t have to answer that question. But let’s assume that perhaps you know what I’m talking about.

Make no mistake, using a bong to smoke weed in Australia is illegal. In fact, any marijuana for recreational purposes in this country is illegal. We were thinking about this yesterday. We found the imagery of a weed smoker bubbling away on a bong to be incredibly poignant, considering the state of the current medicinal marijuana market here in Australia.

When someone uses a bong they stuff dried weed into the ‘bowl’. In the main reservoir there is water. As the user lights the bowl, and inhales through the upper ‘stem’ the smoke is pulled down and through the water. This removes various toxins and particulate matter.

The result is a bubbling effect of the water. These smoke filled bubbles burst, releasing smoke into and upwards through the chamber.

And it’s this image of a bunch of marijuana bubbles bursting and throwing smoke up and into the ether that has us transfixed.

We might also add we had to Google ‘How does a bong work?’ to get the above information. We’ve seen one in a shop, but never used one, Mr. Policeman.

The idea of a marijuana bubble bursting is one thing. And a bubble bursting is quite an emotive image for us as investors.

But if you consider that the point of using a bong is to trap the toxic elements in the water and to release the pure, unfiltered weed to the user, then the bubbles bursting are actually a good thing. It means the whole device, the whole system is working efficiently.

Now you don’t need to be a genius to see where I’m going here. The fact is you can draw a pretty good analogy between the medicinal marijuana industry here in Australia and the use of a bong.

Already there are people in the mainstream media saying this market is in a ‘bubble’. They’re looking at some companies that are seeing their stock price goes from mere cents to over a dollar in the blink of an eye.

8,284% gain in two days — bubble much?

The most notorious of these high-flying marijuana stocks is a company called, Stem Cell United [ASX:SCU]. This was a stock that on 13 March was trading at 1 cent. In intraday trading on 15 March it hit $1.09.

That’s no joke. Jump onto Yahoo Finance. Have a look at SCU’s historical price data. Here’s a company that was effectively worthless, delving into the Stem Cell industry, which went from 1 cent to $1.09 in a couple days. Why?

On 14 March the company released to market an announcement, ‘SCU to pursue opportunities in Medicinal Cannabis sector.’

That’s it. You should see the announcement too. It reads,

Stemcell United Limited is pleased to announce the appointment of Medicinal Cannabis expert Mr. Nevil Schoenmakers as a Strategic Advisor to the Board to assist the Company assess opportunities in the medicinal cannabis sector.’

That’s the announcement that sent this stock up over 8,000% in a couple of days. The possibility they will get into the medicinal marijuana market. Take note people, they don’t have anything to do with this sector yet. Just the idea that they might sent this stock price nuts.

Now, I will be first to admit that stock’s price rise has all the hallmarks of an industry in a bubble. And it’s not the only one, we might add. There seem to be more companies announcing they’re thinking about getting into medicinal marijuana than companies actually involved in the industry.

It absolutely feels like worthless companies are jumping on the bandwagon to boost their share price.

But herein lies the tricky part. You see, this isn’t an industry in a bubble. There are some companies in their own little bubbles. But they’re isolated cases. It doesn’t apply to all.

Not a bubble, just filtering out the toxins

It’s a shame that a company can announce to the ASX they’re looking at other industries. I wonder, if there hadn’t been incredible interest in medicinal marijuana, would they have announced they were looking into nickel and cobalt opportunities instead?

Medicinal marijuana is a real industry in Australia. The government gave this industry the green light last year. The states are now rolling out ways for people to access it. There are growing and cultivation licences on the way for legitimate companies.

There are companies on the ASX that are making money from selling medicinal marijuana related products and services. There are real companies actually doing something in this field that makes them worth the share price they trade for.

In fact, we know of three medicinal marijuana stocks that right now have the potential to make investors huge gains. Companies that we’ve analysed and recommended for readers of Australian Small-Cap Investigator. These companies are developing real products and therapies using medicinal marijuana to help everyday people. They’re almost like biotech companies, and they are not even close to being in a bubble.

But take heed, this is an industry that is in the midst of incredible excitement and mainstream coverage now. There are stocks that are simply worthless, who have nothing to do with medicinal marijuana, seeing ridiculous stock price rises. Those will burn a lot of shareholders.

You have to be able to see those companies for what they are. You need to see some bubbles burst. You need to be able to tell which companies in this industry are toxic and which ones are pure.

When you can do that, you’ll see this is no bubble. It’s just an efficient system, filtering out the toxins. And the stocks that remain will flourish. It’s these ‘good stuff’ companies that have the potential to see your portfolio go massively higher.

Regards,
Sam

PS: Of course it’s also possible that this entire industry is one giant bubble. In fact it’s possible the entire ASX, the entire Australian economy is just one giant bubble.  It certainly something that is a genuine concern for a lot of Australians.

And look, if you’re worried about it then you absolutely need to read Vern Gowdie’s book, The End of Australia. In fact if you’re worried about the whole system crashing down and you haven’t read Vern’s book yet, then you’re crazy.

Vern outlines a strategy to help protect yourself if the whole system, the whole Australian economy, comes crashing down. We’re still mailing copies of his book, but they’re running out quick. But you can actually read it and put Vern’s wealth protection measures in place TODAY if you want, because the instant you order the hardcopy we’ll give you a password to the full online version. Find out more here.


Sam Volkering is an Editor for Money Morning and is small-cap, cryptocurrency and technology expert.

He’s not interested in boring blue chip stocks. He’s after explosive investments; companies whose shares trade for cents on the dollar, cryptocurrencies that can deliver life-changing returns. He looks for the ‘edge of the bell curve’ opportunities that are often shunned by those in the financial services industry.

If you’d like to learn about the specific investments Sam is recommending in either small-cap stocks or cryptocurrencies, take a 30-day trial of his small-cap investment advisory Australian Small-Cap Investigator here, or a 30-day trial of his industry leading cryptocurrency service, Sam Volkering’s Secret Crypto Network here.

But that’s not where Sam’s talents end. Sam specialises in finding new, cutting edge tech and translating that research into how the future will look — and where the opportunities lie. It’s his job to trawl the world to find, analyse, research and recommend investments in the world’s most revolutionary companies.

He recommends the best ones he finds in his premium investment service, Revolutionary Tech Investor. Sam goes to the lengths of the globe and works 24/7 to get these opportunities to you before the mainstream catches on. Click here to take a 30-day no-obligation trial of Revolutionary Tech Investor today.

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