When we recently recommended Canopy Growth Corporation (NYSE: CGC), a few members wrote in asking why we’re covering a multibillion-dollar stock. (Click here to read the recommendation.)
And I admit that at first glance, Canopy does seem out of place in our portfolio of startups and cryptocurrencies.
But we’re talking about the premium name in cannabis here. And cannabis is one of the sectors we’ve been watching and writing about for years.
When we recommended Canopy, the stock had just dropped from $56 to $37 – at the exact time Canada legalized recreational cannabis. As I said at the time, it was a classic “sell the news” reaction, and it looked like a great buying opportunity.
So far the trade is working out well. We recommended Canopy at around $37, and today it’s around $43. (It has traded as high as $46 since our recommendation.)
Early for the Industry
Ideally, of course, I’d love to help all of you find great early-stage cannabis plays. But as we’ve discussed, most of these are going to be private (for now) because marijuana remains illegal at the federal level in the United States.
In private deals, the number of investors is strictly capped, and there are usually rules that prevent public disclosure of the deals.
We hope this will not be the case for much longer. I’m increasingly optimistic that Congress will legalize cannabis in the next few years. If this happens, most of the world will follow immediately.
Whenever that happens, we’ll be able to find and recommend great cannabis startups. Until then, we have to look at mostly Canadian stocks or private U.S. startups.
In some ways, with Canopy, we’re simply playing the hand we’ve been dealt. And let’s be honest: It could be a huge winner over the long run. The company has secured a huge portion of the market; it has the best brands; it has access to $4.5 billion cash, etc. etc. If the world market opens up – and it’s starting to – brands like Canopy will have a tremendous leg up on the competition.
The marijuana industry is still in its early days. We’ll keep looking for startups to recommend. But if we see a good public company for you to invest in, we’ll let you know. It’s a different sort of early investing, but one we’re excited to be part of nonetheless.
Good investing,
Adam Sharp
Co-Founder, First Stage Investor