Editors Note: Guest post by Matt McCall, Editor, MoneyWire Aug 29, 2019, 4:45 pm EDT
Let me be clear: I try to limit emotions when it comes to investing. I’m a research fanatic, and I always go first to the big-picture trends, data, and face-to-face conversations.
But I’ve also learned not to ignore my gut feelings, especially when they have data to back them up.
That wasn’t always the case. Like anything else, my “gut” has gotten better the longer I’ve invested. After 20 years in this business, my intuition tends to be correct.
I have a very strong gut feeling right now, and it’s related to the big opportunity in marijuana stocks.
I have been recommending marijuana investments since 2014, well before most analysts. Many of my early recommendations have soared hundreds … even thousands of percent. A colleague of mine even refers to me as “The Original Marijuana Stock Bull.”
Recently, though, some may have questioned my bullish thesis. My long-term view has never wavered, but marijuana stocks have gotten hammered in the last few months. Since hitting a yearly high in March, the ETFMG Alternative Harvest ETF (NYSEARCA: MJ) is down 40%.
The weakness has turned even some of the biggest marijuana bulls into doubters, but I think the current pullback represents one of the best buying opportunities we may see for some time if you want to invest in one of the fastest-growing sectors in the world.
That’s why I tweeted this last week:
“Are we supposed to use our feelings and emotions in investing?” someone replied. “Hope it turns out right for you.”
That’s why I wanted to write about this subject. I was sharing a feeling I had at a moment when I didn’t have a lot of data at my fingertips. But there are strong indicators to back up my gut feeling.
Take a look at the chart of the EFTMG Alternative Harvest ETF below. Notice how the ETF is near a double bottom at its December low just above $23. A double bottom is a bullish pattern and usually signals a reversal to the upside.
Then there’s the relative strength index (RSI), located at the bottom of the chart. The RSI measures overbought and oversold conditions. A reading above 70 indicates a stock is overbought, while a reading below 30 indicates that it is oversold.
You can see how many times MJ has bounced when the RSI got down to 30, and it is now just below 26. That’s a strong signal that the recent selling is overdone.
It also puts the ETF extremely close to an RSI Crossover, which is when the indicator crosses back above 30 into neutral territory. This is one of my favorite technical buy signals. I’ve made good money over the years thanks to it.
The Upside Is Endless
There is so much negativity in the marijuana sector right now that even some of the long-term bulls have joined in on the selling. That short-sightedness costs them. Every high-growth, early-stage investment theme sees times of both parabolic rallies and sizeable pullbacks.
This happened on the internet … biotech … emerging markets … you name it. And it’s what we’re seeing now with marijuana.
I’m not trying to call a bottom — that’s not only irresponsible, but it’s also nearly impossible and just plain foolish. But I am saying there is a lot more upside in the best cannabis stocks than downside.
According to Arcview Market Research and BDS Analytics, global sales of legal marijuana will increase from $10.9 billion in 2018 to $40.6 billion in 2024. Where else can you find an industry that is expected to grow 272% in six years?
The majority of those sales will come from North America, but here’s the kicker. Those projections assume that marijuana will remain federally illegal in the U.S. You know that I firmly believe legalization is coming far sooner than most expect, which means those estimates are too low and could, in fact, be closer to $60-$80 billion.
According to Echelon Wealth Partners, the legal cannabis market in the U.S. alone could be worth $60 billion if the federal prohibition is repealed. To put that into perspective, the vitamin/supplement market is worth $28 billion and the beer industry is worth $110 billion.
So don’t get caught in the herd of doubters running for the hills. The long-term story is intact, and today is the day to buy. Not tomorrow … not next month … not next year. By then, the big money will have already been made.
Matthew McCall is the founder and president of Penn Financial Group, an investment advisory firm, as well as the editor of Investment Opportunities and Early Stage Investor. He has dedicated his career to getting investors into the world’s biggest, most revolutionary trends BEFORE anyone else. The power of being “first” gave Matt’s readers the chance to bank +2,438% in Stamps.com (STMP), +1,523% in Ulta Beauty (ULTA), +1,044% in Tesla (TSLA), +611% in Liquefied Natural Gas Limited (LNGLY), +324% in Bitcoin Services (BTSC), just to name a few. If you’re interested in making triple-digit gains from the world’s biggest investment trends BEFORE anyone else, click here to learn more about Matt McCall and his investments strategy today.