Booze & Weed Equals a Good Time AND a Good Investment
Pot stocks have been on fire, er, smoking! Wait, that's still a pun, right? Well then, pot stocks are on the roll! Damn it. I've been watching too much CNBC. Anyways...
The rally in pot stocks over the past several days has been impressive, especially given the catalyst - Constellation Brands (STZ) made a $4bil investment in CGC for about 38% of the company. Other names in the space benefited from the deal, names like TLRY, CRON, ACBFF, and many others, along with the ETF that tracks a dime bag worth of companies - MJ. (Full disclosure - I'm long MJ shares and calls, long CGC calls and puts.)
The pure plays aren't for everyone... their volatility is more than some can stomach (doesn't weed help nausea?). For those sorts of investors, the best way to participate may be in STZ itself. You may ask "why?" Well...
STZ's core business is selling booze, which much like tobacco and caffeine, pretty much sells itself. Morality beefs aside, the cash flows are incredibly stable and plentiful, enough to offer holders of STZ a decent 1.4% dividend, which, by the way, has grown more than 40% in a year. It still has room to grow, too, as the payout ratio is a modest 22%. Another fundamental note - shares are not necessarily cheap at 22x this year's earnings estimates, and 20x next year's estimates. However, revenues have grown about 23% over the past five years, as have cash flows, so you're getting good growth from this cash cow.
Technically speaking, shares are in a downtrend. But that's okay, as this long-term play needs to be accumulated over time as prices permit, which is exactly what I'm doing. I prefer buying closer to the recent support at $201, but ideally I'd like to buy closer to the open gap near $190 (also a 50% Fib. retracement). Should that fail, additional, more meaningful support lies underneath at $179, the 61.8% retracement.
It's high time that weed gets some legitimacy, and that we can profit from the process is dope. Look for other majors like DEO, BUD, SAM, TAP, and others to follow suit, as well as tobacco majors like MO and PM.
The rally in pot stocks over the past several days has been impressive, especially given the catalyst - Constellation Brands (STZ) made a $4bil investment in CGC for about 38% of the company. Other names in the space benefited from the deal, names like TLRY, CRON, ACBFF, and many others, along with the ETF that tracks a dime bag worth of companies - MJ. (Full disclosure - I'm long MJ shares and calls, long CGC calls and puts.)
The pure plays aren't for everyone... their volatility is more than some can stomach (doesn't weed help nausea?). For those sorts of investors, the best way to participate may be in STZ itself. You may ask "why?" Well...
STZ's core business is selling booze, which much like tobacco and caffeine, pretty much sells itself. Morality beefs aside, the cash flows are incredibly stable and plentiful, enough to offer holders of STZ a decent 1.4% dividend, which, by the way, has grown more than 40% in a year. It still has room to grow, too, as the payout ratio is a modest 22%. Another fundamental note - shares are not necessarily cheap at 22x this year's earnings estimates, and 20x next year's estimates. However, revenues have grown about 23% over the past five years, as have cash flows, so you're getting good growth from this cash cow.
Technically speaking, shares are in a downtrend. But that's okay, as this long-term play needs to be accumulated over time as prices permit, which is exactly what I'm doing. I prefer buying closer to the recent support at $201, but ideally I'd like to buy closer to the open gap near $190 (also a 50% Fib. retracement). Should that fail, additional, more meaningful support lies underneath at $179, the 61.8% retracement.
It's high time that weed gets some legitimacy, and that we can profit from the process is dope. Look for other majors like DEO, BUD, SAM, TAP, and others to follow suit, as well as tobacco majors like MO and PM.