Businesses have been reading these signals for some time now, using cannabis for everything from THC-infused beverages to massage oils in addition to smoking products. U.S. stock exchange listed companies such as Cronos Group and Canopy Growth Corp., which are valued in the billions of dollars, conduct their operations from Canada and largely benefit that country’s economy instead of America’s. The U.S. alcoholic beverage maker Constellation Brands owns a stake in Canopy.
Scotts Miracle-Gro, the Ohio-based lawn and garden care giant, owns hydroponics solutions popular among cannabis growers, and Los Angeles-based MedMen, founded in 2010, is the first large branded retailer to sell marijuana in the U.S. as a well-run business that deftly navigates the legal labyrinth and financial system. Most legal cannabis revenue, however, has evaded America.
POTUS FOR POT?
Trump’s trade dispute—along with his penchant for attempting to gain the upper hand in surprising ways—could lead him toward federal legalization in the U.S. That would limit Canada’s budding revenue stream, since many businesses, large and small, would love to focus their operations stateside without fear of violations and backed with the assurance that banks would facilitate credit and debit card transactions, as well as supply capital for interstate commerce and legitimate long-term growth initiatives.
After all, if Trump can fixate U.S. tariffs on Canada’s milk production, why not target a potentially larger industry? Trump has two other incentives for legalization. One, an emergent marijuana industry would bring much-needed state-level and federal tax revenue that could offset funding gaps from last year’s historic tax reform. Secondly, a new source of job creation would aid Republican areas with huge swathes of farmland.
American investors should cheer this potentially game-changing opportunity. It is rare to see a nascent industry with a built-in customer base, as well as to spot firms likely to benefit from the shift, before the event has been finalized. Furthermore, most of the gains from an investment accrue to those capable of getting in early. Think of those who bought into Microsoft or Google before they were global giants. That might be the situation here for U.S. pot investors.
Of course, this all hinges on our wildly unpredictable president, so the possibility remains that this amazing investor opportunity goes up in smoke.
Ross Gerber is CEO and president of Santa Monica, Calif-based Gerber Kawasaki Inc., a SEC-registered investment advisor with approximately $783 million in assets under management. Gerber Kawasaki clients, firm and employees own positions in Cronos, Medmen, Constellation Brands and Scotts Miracle Grow. Readers shouldn’t buy any investment without doing their own research to determine if the investments are suitable to their situation.