Why Invest in Forever Stocks?
Of all the ways to make money as an investor, perhaps the most rewarding is buying a stock when it is young and then holding that stock for a very long time, while it grows, and grows, and grows, bringing you profits topping 100%, 500%, even 1,000%.
Most experienced investors can easily name stocks that they wish they still owned—stocks that have doubled many times over the years. These include not only today’s big winners like Alphabet (GOOG), Amazon (AMZN), Apple (AAPL) and Netflix (NFLX) but also stocks that were previously hot and are bigger and growing more slowly now, like Carnival (CCL), Cisco (CSCO), Disney (DIS), Home Depot (HD) and Microsoft (MSFT).
But most investors who once owned these stocks don’t own them anymore!
So why are so few investors able to hold winning stocks long-term?
Because they get nervous about short-term concerns. Because they lack conviction. And often, because they become seduced by other stocks, and sell their old winners for modest profits instead of hanging on for the bigger, longer-term payoff.
And then, years later, they often wake up and say, “I wish I’d held onto that stock.”
[text_ad]
So, this series of 10 weekly posts featuring stocks that you can buy with the intention of holding forever is designed to help you do just that.
But note this—the goal of this report is not to identify stocks that can give you a modest long-term return, like Johnson & Johnson (JNJ) and Visa (V). Those stocks are fine for conservative investors working to keep their wealth, but my goal is to identify stocks that can make you rich!
I want to identify the next Amazon.com (AMZN), the next Apple (AAPL), the next Alphabet (GOOG), the next Netflix (NFLX), the next Nvidia (NVDA) and the next Tesla (TSLA).
How to Find Forever Stocks
The key attributes I look for in forever stocks are these:
A product or service or business model that is revolutionary.
A product or service or business model that serves a mass market.
A company that’s still small enough to grow rapidly.
A company that is not respected—perhaps not even known—by most investors.
Last, but not least, I look for a chart that shows that other investors have begun to recognize the company’s potential; that tells me that my thinking is on the right track.
For the record, stock #1 in this series was Autohome (ATHM), the Chinese company working to be the center of all consumer-oriented automobile information in China.
Forever Stock #2 was Axon Enterprise (AAXN), formerly known as Taser. The company still sells those stun guns, but has a great new business model based on selling body cameras and in-car cameras to police departments, collecting the resulting video and storing it in the cloud, and thus generating great recurring income.
Stock #3 was Zillow (Z), the king of real estate information in the U.S., and still growing at a good pace, with revenues up 27% last year.
(Note: These are not in alphabetical order. Instead, I’ve been trying each week to highlight the stock that’s at the best short-term buy point—though as I near the end of the list the setups are growing less than ideal.)
Stock #4 was Square (SQ), the company that began by enabling small merchants to process digital transactions on a phone or tablet, and has evolved to provide a wide range of software and hardware products, all designed to empower merchants of any size to serve their customers more effectively.
Stock #5 was SiteOne (SITE), the company that was spun off from Deere & Company in May 2016, and is now the largest (and only national) supplier of landscape products in the U.S., and has huge potential to keep growing by acquisition.
Stock #6 was GrubHub (GRUB), the leading online and mobile food ordering service in the U.S.
Stock #7 was Carvana (CVNA), the online-only used car dealer that allows customers to shop, finance, and trade in cars through their website.
Stock #8 wasiQiYi (IQ), the Chinese company known as “the Netflix of China,” though of course the parallel isn’t exact. (The stock just came public in April and already readers of my Cabot Stock of the Week have more than doubled their money!)
And Forever Stock #9 is:
iAnthus Capital (ITHUF)
The big story here is cannabis, the fastest-growing industry in America today!
And that includes Canada, which has a head start on the U.S. legally and already has five growers valued at over a billion dollars each.
Those big Canadian growers are the most obvious place to invest, but I’ve chosen iAnthus as my forever marijuana stock for three reasons.
One, it’s a vertically integrated company (cultivation, processing and distribution) so it’s less susceptible to falling prices should there be an oversupply of marijuana.
Two, it’s a U.S. company and thus will benefit more as the U.S. market grows increasingly legal and eventually exceeds the Canadian market in size.
And three, it’s not as well known as those big growers and thus will benefit more as it becomes known and respected.
iAnthus has interests in marijuana businesses in six U.S. states, encompassing eight cultivation facilities, five processing facilities and 46 potential dispensaries, but its real focus is the East Coast, particularly the heavily populated triad of New York, Florida and Massachusetts, with a combined population of 48 million.
In Florida, the company has 200,000 sq. ft. of cultivation facilities—which have been producing since April 2017—and licenses for up to 30 dispensaries, operating under the GrowHealthy and McCrory’s brands. GrowHealthy began delivery sales in November 2017, and expects to open dispensaries in Tampa, Orlando, West Palm Beach and Deerfield Beach over the next year.
In New York, the company has 39,500 sq. ft. of cultivation facilities and four dispensaries, scheduled to open between now and the third quarter of 2019, operating under the Citiva brand. The company’s flagship dispensary, located across from Barclays Center in Brooklyn, is expected to open in Q4 2018—and is expected to be one of only three competitors in Brooklyn, a borough of approximately 2.6 million people.
In Massachusetts (the Colorado of the East), the company has 36,000 sq. ft. of cultivation facilities, a Boston dispensary scheduled to open in this quarter, and locations for two more dispensaries secured—all operating under the brands Mayflower and Pilgrim.
And then there’s Vermont, the first state to legalize recreational marijuana via legislative action. Even though there are only 600,000 residents in the state, there’s a large tourist population (about 13 million visitors annually). iAnthus’ brand, GrassRoots, has 6,900 sq. ft. of cultivation facilities and one of only five licenses in the state, with one dispensary open now and another proposed.
Additionally, out west, the company has Organix in Colorado, which includes both a cultivation facility in Denver and a dispensary in Breckenridge. And in New Mexico the company has an interest in Reynold Greenleaf, a management service company.
Going forward, I expect to see more acquisitions, either partial or whole, as founders of smaller operations look to cash out before they are steamrolled by the “big boys.” The pace of acquisitions will be determined not only by the available supply of founders looking to sell but also by the cash, credit and shares that iAnthus has available to spend. That, of course, is uncertain but trends are good.
In the first quarter of 2018, revenues were $3.2 million, up from $0.3 million in the first quarter of 2017. The company is not profitable yet, but that’s absolutely normal for this industry, as private equity continues to pour money into companies racing to get big.
As for the stock, which is listed in Canada because the federal legal issue won’t allow U.S. marijuana stocks on the major U.S. exchanges (but will allow Canadian stocks), ITHUF peaked in January at 5 (in sync with the broad market), bottomed at 2.25 in late March, and just broke out to new highs last week, which makes it one of the leading stocks in the sector.
The correction from that high could take the stock down toward its 25-day moving average, currently around 4 (or even lower), but long term, the prospects are bright, which is why I’m happy to make iAnthus my Forever Stock #9.
Note: iAnthus is one of the stocks in Cabot Marijuana Investor, where the average profit in the portfolio is 124%.
For details, click here.
[author_ad]
