It’s my job as UK editor of Technology Profits Confidential’s to publish the investing ideas you don’t hear about anywhere else.
We’re always on the hunt for fringe ideas: exciting stories just about to go mainstream. Things you won’t read about in the FT or Daily Mail (until this time next year).
How do we find fringe ideas? We’re obsessed with the next big thing. Examples might be a technology just out of the lab, or a law just about to pass.
But looking over the horizon all the time has its drawbacks. Because we’re always focused on the new thing, we sometimes skip past important things that aren’t so new.
Take June’s issue, for example. In the issue, Ray and I looked at a pharmaceuticals company which is making a new treatment for a major illness which is derived from cannabis.
It’s a big story in its own right. But it’s still just a part of a much bigger story about cannabis investing, and cannabis science.
The prospects for the treatment are exciting. And this is a company you want to buy, urgently. But it’s only the most recent chapter of a very long story about cannabis investing and cannabis science.
We can’t expect everyone to have been following this story from the start. There’s so much to it. Understanding cannabis investing by reading about one company alone is like trying to understand Brexit just by reading the stories in today’s newspaper.
So in that issue, I also took a good overall look at the cannabis story to explain why it’s so interesting right now. And to today I want to share that with you…
What’s so exciting about cannabis investing?
Two things are happening, either one of which on its own would be a big story.
The first one is simple: countries are starting to legalise cannabis. For the first time, regular, legit companies are being allowed to grow it and sell it. The illegal dealers are being pushed out.
We don’t have precise numbers on how big the illegal cannabis business is. But we have estimates, and they’re huge. It’s estimated to be worth £3bn in the UK and £37bn in North America.
In other words, the biggest players in the North American market could have revenue in the billions in a few years’ time. These are companies which are only just listing now for a couple of quid.
It’s a very simple and powerful story. It doesn’t happen very often – maybe only once or twice in an investing lifetime.
The second big story is about cannabis and medicine.
For cultural reasons, scientists ignored the cannabis plant until about the 1980s. When they finally got around to looking at it, what they found was shocking.
They found that our bodies have an entire system, previously undiscovered, which regulates our internal organs and nervous system.
It’s controlled by chemicals which are produced by our bodies; chemicals which are almost identical to the chemicals found in the cannabis plant. The system is called the endocannabinoid system (endo meaning endogenous, or produced in the human body).
The endocannabinoid system is made up of receptors which live on the surface of particular types of cells. There are two types of receptors: CB1 and CB2. CB1 receptors are to be found mainly around the brain and the central nervous system; CB2 are found mostly in peripheral organs, particularly in cells associated with the immune system.
The body produces these endocannabinoids and uses them to send messages to the CB1 and CB2 receptors on the organs and nervous system. Basically, the body uses the chemicals to regulate these systems.
And these receptors are everywhere. They help regulate sleep, appetite and digestion, mood, motor control, immune function, fertility, pleasure and reward, pain, memory, and temperature regulation.
So the body produces cannabinoids naturally. The cannabinoid system is used to regulate the nervous and immune system. It’s a system we share with lots of other creatures. And it’s been found to influence a wide range of bodily functions, from mood to sleep to fertility. It’s like a parallel nervous system.
The cannabis plant is a great source of cannabinoids. The most famous cannabinoid is tetrahydrocannabinol (THC), the compound that gets you high. Cannabidiol (CBD) is another major one. It doesn’t get you high, but it’s increasingly widely used for pain relief and as an anti-inflammatory. Up until recently these were the only two I’d heard of. But it turns out there are at least 113 cannabinoids isolated from the plant, 90% of which have no psychoactive effects.
Now cannabis is fair game for scientists, they’re starting to test those 113 cannabinoid compounds to see what they can do. And the research is incredibly promising so far…
It could potentially be used for: limiting cancer’s spread; stopping chronic pain without the risk of addiction; muscle spasms; increasing lung capacity; glaucoma; epileptic seizures; anxiety; Dravet’s syndrome; slowing Alzheimer’s disease; multiple sclerosis; hepatitis C; inflammatory bowel syndrome; arthritis; obesity; Parkinson’s disease; post traumatic stress disorder; strokes, concussions; nausea; and alcoholism.
Billions and billions of pounds will be made as companies, like the ones we’ve told our Technology Profits Confidential readers about, start commercialising these discoveries.
Okay, cannabis is a big deal. How’s legalisation coming along?
A funny thing is happening where public attitudes to cannabis are getting more tolerant in lots of places at once. That’s why legalisation is on the agenda.
Canada is the world leader. Cannabis has been legal for medicinal purposes there for 16 years. And just last month, the government there legalised cannabis for recreational use too.
North America is the biggest market for cannabis though. It’s also the place where legalisation is happening fastest.
Many states have gone the whole hog, like Canada, by legalising cannabis supply and consumption, however cannabis is still banned at a Federal level over there.
In the US and Canada the first step has been legalisation for medical purposes; then full legalisation for recreational use.
Lots of European countries are starting down that path. Germany is granting licences to 10 companies to grow cannabis. It’s planning to legalise it for medicinal purposes. Italy is doing the same thing. The Czech Republic, Portugal, Greece and Poland have legalised it for medicinal purposes, but they haven’t yet opened up the supply side.
Apart from Canada, there are two other countries building up their pot-growing industry: Israel and Australia. In both of these countries it’s legal to grow pot. And crucially, they both have their eye on the export market. They want to grow pot and sell it into markets where it’s not yet legal to grow. Australia’s Health Minister, Greg Hunt, has said he hopes Australia can be the world’s top supplier of medicinal cannabis.
Where does that leave the UK?
Did you know the UK is the world’s biggest producer of legal cannabis?
The UK has quietly become a cannabis exporting powerhouse. According to the UN’s International Narcotics Control Board, 45% of the world’s total supply of legal cannabis is grown in the UK. It’s also the biggest exporter by far, with 70% of the global export market.
Legalisation isn’t on the agenda here. There’s too much going on. But this is how it happens. But it is starting to be talked about by leading politicians and the mainstream press.
There’s now an interest group which is strongly motivated to legalise it. Public opinion is somewhere between supportive and indifferent. Over time, the interest group will win concessions – like, say, legalisation for medicinal purposes – which will grow and strengthen it. Then eventually it’ll be strong enough to lobby for whole-hog legalisation.
How can I invest in this trend?
I hope I’ve shown you that cannabis is a huge, multifaceted trend. There are many ways to invest.
- The first and most obvious answer is to buy shares in growers. Cannabis growers are supplying the new market for legal recreational cannabis as well as the fast-growing market for medicinal cannabis.
- Medicinal cannabis is going to be huge, and it’s going to create hundreds of listed businesses.
- Then there’s the ‘picks and shovels’ play. Many companies are offering services to this huge new industry.
Cannabis is one of the deepest, richest investment stories I’ve come across. So if you’re still on the fence, I’d suggest this is a good time to get involved.
And I’ve uncovered three market plays that I believe offer the best opportunity for serious and potentially dramatic gains from this story.
I’ve put the full details of them – and how you can get involved in to a new report.