By Nigam Arora
The new farm bill may be a money maker for stock investors
(Adds that the farm bill was passed Wednesday.)
In the U.S., marijuana is still federally illegal. However, its cousin hemp is due to become legal at the federal level based on the farm bill that was passed by Congress on Wednesday.
For investors, the key question is how to profit from hemp becoming legal. When I wrote "How to potentially become a marijuana millionaire, albeit carefully (http://www.marketwatch.com/story/how-to-potentially-become-a-marijuana-millionaire-albeit-carefully-2018-08-27)," the most important word in the headline was "carefully." Being careful also applies to hemp. Let's explore with the help of a chart.
Please click (https://thearorareport.com/chart-of-new-age-beverages-cbd-infused-drinks) here for an annotated chart of New Age Beverages (NBEV). Please note the following:
-- New Age Beverages has the potential to be a big, indirect beneficiary of the federal legalization of hemp.
-- The chart shows The Arora Report buy and sell signals on New Age Beverages.
-- The chart shows that this is a very volatile stock. My 30-plus years in the markets have taught me to be humble. In the business of investments and trading, The Arora Report's calls on the volatile New Age Beverages have been on target. Having said that, it is important for investors to be humble, as it is very easy to make a wrong call and lose money on this stock.
-- As another note of caution, investors should consider New Age Beverages a speculative stock. Risk controls are extremely important. Risk controls include proper position sizing, scaling in the buy zone, scaling out in the target zone, adjusting quantity based on changing conditions and scaling out in the stop zone.
-- As of this writing, New Age Beverages is approaching our first target zone. Target zones and stop zones are given simultaneously with the buy zone. The second target zone is higher. We are likely to take partial profits into the strength.
-- Note from the chart that, at this time, volume is not high compared to the prior high-volume periods. This indicates that Wall Street has not caught on to the potential of this company. If Wall Street jumps on board, the stock could go much higher.
-- RSI (relative strength index) shows that the stock is overbought. This means that a pullback could happen anytime.
-- New Age Beverages has a portfolio of cannabidiol-infused beverages. Cannabidiol is known as CBD.
-- Hemp is rich in CBD but has very little THC.
-- Marijuana has CBD, THC and several other molecules. It is the THC that makes marijuana users high.
-- There are claims that CBD cures a number of illnesses.
-- In our analysis at The Arora Report, CBD beverages are the next big thing.
-- Coca-Cola (KO) owns Vitaminwater. Once hemp becomes federally legal, companies such as Coke, PepsiCo (PEP) and Keurig Dr Pepper (KDP) are more likely to jump into CBD-infused drinks. Please see "Marijuana beverages are the new thing, but investors should only take sips (http://www.marketwatch.com/story/marijuana-beverages-are-the-new-thing-but-investors-should-only-take-sips-2018-10-02)."
-- New Age Beverages is a prime buyout target or, in the alternate, a candidate for an investment from a beverage or consumer-product company. In the marijuana space, The Arora Report signals have already generated significant profits from investments by Constellation (STZ) in Canopy Growth (WEED.T) and by Altria (MO) in Cronos (CRON.T). The Arora Report call that was given in advance regarding tobacco companies investing in marijuana has proven spot-on. The Arora Report gave a signal to buy Cronos just before Altria made its investment. Please see "Seven reasons Big Tobacco is likely to make a move on the marijuana industry (http://www.marketwatch.com/story/seven-reasons-why-big-tobacco-is-likely-to-make-a-move-on-the-marijuana-industry-2018-09-10)."
-- Investors may be tempted to buy Aurora Cannabis (ACB.T), Tilray and Aphria (APHA.T). However, these companies are not likely to see a material benefit to their revenues in the near term from hemp legalization.
-- Of note is a company called Charlotte's Web Holdings . The company is a popular provider of CBD products to consumers. The company has had a run-in with the FDA over its claims. Unlike many marijuana companies, this company appears to be profitable.
Ask Arora: Nigam Arora answers your questions about investing in stocks, ETFs, bonds, gold and silver, oil and currencies. Have a question? Send it to Nigam Arora (mailto:email@example.com).
Pay attention to the trading history of marijuana stocks. They tend to run up going into the news and then fall after the news has been released. History does not always repeat itself, but it is important nonetheless.
Please also read:
To invest successfully in marijuana stocks, avoid this one thing (http://www.marketwatch.com/story/to-invest-successfully-in-marijuana-stocks-add-this-pointer-to-your-list-of-things-to-do-2018-10-09)
How to survive marijuana stocks' rollercoaster ride (http://www.marketwatch.com/story/how-to-survive-marijuana-stocks-rollercoaster-ride-2018-09-24)
If you buy only one marijuana stock, this should be it (http://www.marketwatch.com/story/if-you-buy-only-one-marijuana-stock-this-should-be-it-2018-10-05)
Tilray is the poster boy of short-squeeze stock candidates -- here's how to find others (http://www.marketwatch.com/story/tilray-is-the-poster-boy-of-short-squeeze-stock-candidates-heres-how-to-find-others-2018-09-19)
Marijuana investors got burned by Pepsi -- how to avoid this mistake in the future (http://www.marketwatch.com/story/marijuana-investors-got-burned-by-pepsi-how-to-avoid-this-mistake-in-the-future-2018-10-04)
Disclosure: Subscribers to The Arora Report (http://thearorareport.com/) may have positions in the securities mentioned in this article or may take positions at any time. Nigam Arora is an investor, engineer and nuclear physicist by background who has founded two Inc. 500 fastest-growing companies. He is the founder of The Arora Report, which publishes four newsletters. Nigam can be reached at Nigam@TheAroraReport.com (mailto:Nigam@TheAroraReport.com).
-Nigam Arora; 415-439-6400; AskNewswires@dowjones.com
(END) Dow Jones Newswires
December 13, 2018 18:59 ET (23:59 GMT)
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