Last week as I was driving my daughter and her friend to their first soccer game of the season we witnessed a frightening scene.

As we approached a very busy intersection, just outside of Washington, DC, a large black SUV, travelling at a high speed, plowed into a Jeep, sending the car tumbling like a matchbox version of itself.

From my vantage point I could easily see the long blonde hair of the woman driving the Jeep whipping around inside the Jeep as her head was jerked from side to side when the car rolled over and over.

It was a strange juxtaposition to DC politics, when you saw no less than 15 bystanders rush the flipping car to help, as soon as it came to a halt.

One guy was on top of the driver side door, which was now facing up as the car lay on its side, in what seemed like 2 seconds. He was trying to pry open the door to help the stunned driver.

When she left home that Saturday morning I’m sure the young woman driving the overturned Jeep would never in a hundred years have predicted where she would be a few hours later. Luckily she was wearing a seatbelt and appeared shaken, but not really injured, after she was pulled from the car.

Had she stopped her turn a second sooner, or turned through the intersection a second quicker, her day would have gone on as usual.

Her timing, even though the other driver was definitely going to fast, was off just a touch. And that cost her in time, money, and likely some major physical soreness.

Timing is a MAJOR part of my trading and investing. And when it’s off I suffer the same “costs” that she endured from her accident.

If you’ve traded for any amount of time you definitely know there can be a physical impact to your body when you’re not trading well, in addition to the cost in time and money.

Being able to predict a stock or warrant’s movement with accuracy in a defined time frame is a huge advantage both in terms of increasing returns and reducing risk in your portfolio.

But, though it may be difficult to believe, there are also times when it’s literally hard to be wrong in the market. I believe we’re there with Cannabis warrants (and stocks).

Last month in The Warrant Observer newsletter, part of our paid premium content, I detailed investments in three Canadian warrants that trade in the U.S. These warrants are all derived from cannabis stocks headquartered in Canada.

As of yesterday, one month later, one of the warrants was flat, one was up 21% and one was up 65%. If you think you’re too late, or too early, to the cannabis investing party…you’re just wrong. I think it’s literally hard to screw up the timing on this one, unless you just do nothing.

Warrants are a great way to gain leverage, and take advantage of growth in what is going to be a massive industry in the U.S.

Slow Start Equals Opportunity

Much of the following content is from The Warrant Observer newsletter Issue 3, delivered one month ago to subscribers.

The cannabis investing theme has investors from all over the U.S., whether your state has legalized marijuana in one form or another or not, giddy with excitement. We are literally watching the birth of a multi-billion dollar industry unfold before our eyes.

If it were not for the legal issues surrounding the industry, marijuana is still considered an illegal substance at the federal level in the U.S., the industry would already be far ahead of where it is now.

But, it is because of these legal issues, that the market has been slow to develop, even though there is abundant demand, and that has given investors a larger window of opportunity to get into the sector.

This has also resulted in a large number of small players in the sector that have had a chance to compete and develop, where normally by this time
big money would have made much more of an impact on the sector than it has.

Regulatory Climate

While the regulatory climate for legalized marijuana has been challenging to this point, it appears to have reached a tipping point. The large number of states approving some form of legalized marijuana in recent elections is combining with a push at the federal level to at least lay the groundwork for federal legalization.

Congress is scheduled to vote this week on a bill providing a safety net for banks that wish to participate in the cannabis sector, protecting them from federal penalties if they do. (At the time this article was sent to subscribers the vote had not taken place, but the Financial Services Committee voted to send the SAFE bill to the full House a few days later.)

Large banks know there is money to be made in financing the sector, and are chomping at the bit to get in.

“For six years, Congress has failed to act on the issue of cannabis banking, putting thousands of employees, businesses and communities at risk,” Rep. Ed Perlmutter, a Colorado Democrat and one of four chief sponsors of the bill, said. “However, the issue is finally receiving the attention it deserves with the first-ever congressional hearing and now a scheduled committee vote.”

You can bet that if we have arrived at the point where banks, one of the most highly regulated institutions we have, are allowed to participate in the marijuana industry, it will not be long before full federal legalization follows.

Growth at All Costs

A colleague of mine recently interviewed for a position with a cannabis company with grower and distribution rights in several states.

Speaking with the CEO during the interview, the message was crystal clear, they must grow and grow quickly in order to be acquired when full legalization goes into effect.

They are looking at a one to two year timeframe, fearing that if they do not grow large enough in three years it will be too late.

The worry is that if they do not achieve scale before that time, the large players will have acquired their competitors who have reached scale, and they will simply be crowded out of the market by the inevitable huge players that will eventually dominate the market.

As the CEO put it, the trick is to ride the horse as hard as possible to the last moment, and then jump off before the horse falls out from under them. Meaning they are crushed by the competition.

But, until that time, the industry should experience tremendous growth, from both large and small companies, from the tiny base it occupies today.

Now let’s look at three warrants that should thrive in the cannabis industry…

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