Pot Stocks: Values or Traps?

stocks, bonds, ETFs straight out of downtown Chicago. This is Zach's Market Edge. Welcome to Zach's Market Edge, the podcast about investing in your life. I'm your host, Tracy Brinek.

And this week I'm joined by Ben Raines, a Zach strategist who is also the editor of the marijuana innovators newsletter here at Zach's. And I've invited him on the podcast this week because we've been talked about the pot stocks in a long time. It used to be a real hot topic here on the podcast, I would say about five or six years ago. And then it seemingly has fallen kind of out of favor, but maybe that means that there's some deals there.

So I really wanted to take a look at some pot stocks this week to see are there some values or is this a trap kind of situation? And what is going on in the cannabis industry? We've all been waiting a long time. It seems like for some kind of federal response here on cannabis, we keep getting states approving it and that's been passing in a lot more states over that five year period.

But the feds seem to be still kind of dragging their feet. So where are we now on pot and are there deals? So welcome Ben. Well, thanks for having me, Tracy.

Good to be here. Yeah. So you're in charge of our newsletter with all these stocks. I do know that some stuff is going on on the federal level once again.

But it seems like over the years, we've talked often on about what is happening. And so for instance, there was this thing called the banking act and that's been kind of hovering out there seemingly for four or five years, I wanna say. And what that is that for those not familiar who aren't paying attention, that was basically going to be passed just to allow the cannabis companies access to the banking sector. Because right now they cannot go to a bank and get a loan and start up their cannabis dispensary.

That's not allowed. And a lot of things are in cash only as a result. And that's not a good thing you really want for an industry like this that's growing. It is getting bigger.

And so for years, it seemed like this was gonna get passed. And if I recall right, it did pass like the Senate or something at least one time or maybe it was a house and then it didn't pass a high-level track. Yeah, so what is happening with the, let's just start with the banking act thing. Like what is happening with that?

Okay, okay, so we can kind of go through the banking act and then we can go through some of the ideas of rescheduling cannabis, which was the big news earlier, I guess late August that sent all these stocks flying temporarily. So we can go to the Safe Banking Act if we want first. So at this point, it's now called the Safer Banking Act, just a different acronym, but it's pretty much all the same in the sense that it's going to try to let companies in the legal cannabis space operate like any other business would be able to, where they have access to anything that a regular business, which is at the moment as you said, it's these cash heavy businesses, they can't get access to great finance and they can't get access to great credit. They really have to operate almost like they are, as bad as it sounds like a drug dealers, even though it's legal in half the country, at this point in terms of recreational marijuana.

So that's this act they're hoping to pass that would really, without outside of federal legalization, the Safe Banking Act is what a lot of people in the industry think would help. These bigger players and smaller players all be able to compete in access, just traditional financial services that every regular business no matter what you're doing is able to access. And it's really hindered all of these cannabis companies for a really long time. And it's getting just worse and worse and harder and harder to operate these businesses, especially as you said, they're trying to grow, they're trying to be able to adapt to the expanding markets all over the United States.

And it's just become more and more difficult without, as we said, access to everyday banking services that they really are not able to get in any way. Yeah, I think it's kind of incredible that they don't have access to banks, given the sheer volumes that they're selling right now. Like I know even in the state of Illinois, it's like over a billion dollars or something a year is going in the cannabis sales here. And imagine that's just all cash.

Yeah, so in late September, the Senate Banking Committee passed the, as I said, the Safer Banking Act, in a 14 to nine vote truck shummers. Now they're trying to get the ball rolling. It's a little unclear with obviously there's lots of things going on in the world that the federal government trying to deal with at the same time. It's now going to be election year.

So we have to see kind of what the political will is for this to get passed. At this point, Schummer has been a big proponent of safer banking and really cannabis legalization of all kinds. At the federal level, so he's still optimistic that they can get enough support because there is growing support even on the Republican side of the aisle, which has traditionally been very against drugs and anything related to marijuana as well. But the grassroots support is finally showing that maybe there are enough Republicans that are willing to at least tell their constituents they're in support of these.

So in the near term, it's really hard to say what's going to happen with any of these acts. I know colleagues of ours reach out to me all the time saying, oh, it seems like this is definitely going to happen now, but it's very hard to know where the federal government's going and I'm not in these Senate committee meetings or these house meetings and knowing who's trading what to get what votes passed. But there are a lot of things, including the Safer Banking Act or Safer Banking Act. There's also the Hope Act and the Grand Act so the Hope Act is just various other things.

And then there's the MoRA Act, which is marijuana opportunity reinvestment and expungement act. So this is kind of a wider-ranging cannabis legalization bill that's out there. It's passed the House twice. But as I said, there's multiple layers to get through the federal government and it's hard to know exactly what's happening.

But it does look a lot different than say even five years ago. There's a lot more talk about this openly. It's not a taboo subject by any means anymore. And as we'll get to later on with kind of the state-by-state legalization, it's a night and day difference from five years ago, especially 10 years ago.

And then on the just kind of go more along with lines of what we're doing at the federal level, what they're trying to do. The Department of Health and Human Services, so the HHS back in August officially recommended easing restriction of marijuana in terms of the scheduling of the drug. So about a year ago, the Biden administration said they were gonna look into the scheduling of cannabis or marijuana because right now it's a Schedule I drug, which means it has no accepted current, accepted medical use in a high potential for abuse. So this puts it along the lines of heroin, which seems crazy since half the country has now legalized it recreationally.

So the DA has final say over that matter. It's not exactly clear when they're gonna possibly reschedule it from Schedule I to Schedule III, but the DA has based on all the things I've read, never really rejected the HSA's reschedule recommendation. So at the moment they're looking at the three criteria, which would be it's potential for abuse, potential for medical uses, and then the extension, which it's unslaved slash addictive. So the hope is that there would be a reschedule down to Schedule III, which would then actually help it right away in terms of some tax code.

So at the moment, there's a tax code in the IRS called Section 280E, which essentially prohibits cannabis businesses that are engaged in the trade or distribution of quote, Schedule I or Schedule II, controlled substances from deducting expenses at the federal, on their federal taxes. So really state legal chaos business or excuse me, are still kind of operating, even though it's legal in those states and medical or adult use or both, kind of like drug dealers as we said, which makes it more of the shocking that they're even succeeding at all. So that would be the hope right away from this de-scheduling. That said though, or I should say rescheduleing.

People want it de-scheduled completely, though the broader proponents of like wide-scale federal legalization think that if it just got de-scheduled, this would then just kick the can down the road and then cause even more problems that are kind of unforeseen at the moment. So despite all the hopes of rescheduling to Schedule III, the big proponents of widespread federal legalization think that might not even be the best plan at the moment. So we'll kind of see where we go from here. But that's kind of where we are in terms of all of the federal level legalization efforts and de-scheduling efforts or rescheduling efforts and the Safer Banking Act, it's all flowing out there.

But I mean at the moment, as you kind of alluded to, I think you alluded to at the beginning, Ohio just at the beginning of November became the 24th state to legalize adult use cannabis. And that's a swing state. So this is not just deep blue California and places like that. It's a totally new world.

So with Ohio, 53% of the US now lives in a state where adults can legally use cannabis recreationally. It just prays when you think about that California in Washington, Colorado didn't even legalize adult use until 2012 as the first state. So in essentially a decade, we've gone from nobody to half the country. So it is moving in that direction.

But that's what makes it all the more surprising that the stocks are such poor performers. Obviously, they are businesses and they've been struggling with all of these restrictions, both like we were just talking about with the banking side of things. But also there has been supply and demand issues with marijuana. There's been too much supply.

And while there is demand, there hasn't been enough demand, it seems, because I know the price of cannabis has plunged that hasn't helped some of the businesses either. So. Yeah, and like with lots of things, there was a COVID shock and then there was a rush for as more states kind of quickly legalized, there was a rush for a lot of businesses to get into it quickly, then they overproduced and then yeah, prices, it is big supply, glut and they're still trying to work through all of that. So that's certainly been a hindrance to a lot of these companies as well as you mentioned.

So let's talk about some of the stocks now. Obviously you run the newsletter, so you have a handle on all of these stocks, but it has been a difficult time the last couple of years. Obviously a lot of the growth stocks in general have sold off and that includes a lot of the cannabis stocks that were pretty hot during the pandemic. They did get a boost because we're all getting stimulus payments and things.

And we had extra cash around and some of it might have made its way into the cannabis side of things. And now that's kind of ended. So we have begun to see a pullback in a lot of these stocks, but I haven't looked at them myself in a couple of years, at least the actual producers, the ones up in Canada. So I took a look at a couple of them for the first time in a couple of years and I was kind of shocked at what the charts looked like.

So one of the big ones I looked at was Canopy Growth, which CGC, right, is the ticker? Yeah, CGC. That one is always up there on the list when everyone was talking about the cannabis producers and everything. And then the other one is Tilray, because that one TLRY is the ticker.

That one had the big surge out of it's when it went public and everybody had a B in Tilray and it soared, it came back down. But then it got like a bid during the pandemic, but now just looking at that chart, it's terrible. And both of these stocks are trading under $2. And Canopy is even under $1 now, it's around 60 cents.

So let's talk about Canopy Growth first, I guess, because that's the cheaper one. I've noticed that a lot of people are simply kind of trading it now since it's under $1 and it's at 60 cents. But I'm bringing up my charts because I did want to look at the price to consensus chart, which is the earnings. And earnings are still negative on Canopy Growth, so they're not making any money right now.

But this is the price and consensus chart and it is showing an improvement in the earnings outlook for the next, at least through 2024, it's a little early on 2025. But look at that chart, I mean, it's down there near zero now. Yeah, I mean, I'm looking at that same chart as well on another screen. And yeah, as you said, Tracy, some of these stocks have certainly become trader stocks and the average investor has become pretty thrown off by these stocks because there was all this hype and there's been so many of these boom bust cycles already.

And I do think Tilray and Canopy became kind of a victim of the own hype of the industry that wasn't their own fault. Like they went on these massive runs right when they went public and then there was the big post-pied and election spike where everyone thought, oh, they're gonna legalize cannabis right away. Now that they're in, so there was just all these euphoric runs that they couldn't sustain without what people were hoping for actually happening. So they went on these massive runs thinking, oh, well, federal legalization is a done deal.

They're able to come to the United States. They'll have all this institutional money chasing everything. And instead it's still been kind of business as usual where they're just operating in Canada and it's still just kind of a hodgepodge, add a kind of world that they're living in. So Canopy, as you said, yeah, trading at 56 cents per share.

It's certainly, if you have money and you wanna just throw whatever small amount, you could see where it goes the next, like that's what I keep telling my subscribers through the marijuana innovators newsletter is that these are still long-term plays. I mean, you think the big shift we've seen in 10 years in the United States. And then if you look at like the Gallup poll numbers and just the people in support of legalization, it's now on both sides of the aisle, kind of no matter where you're from. Now the biggest barrier to if you want legalization is your age and as obviously older people become less and less a part of the things we're deciding it, younger people on both sides of the aisle are pro-legalization.

So eventually we're going to get there. And these are just longer-term plays that have gone through a brutal stretch. And I think there's just gonna be more consolidation from companies like Canopy and Tilray. Canopy's actually still a decent chunk of its own by consolation, which is a big brewer.

So they own Modello, which is actually not Modello, especially ours, the number one selling beer in the United States. So they have a big stake in the company. It's obviously been a drag on their business, but they still have long-term upside where they think that could play a big role in their portfolio, not necessarily tomorrow or next year, even a couple years, but down the line. So there's still people who have a lot of money at stake in this business that aren't directly tied to the industry that think there's gonna be really big growth down the line.

Yeah, I put up Constellation Brands chart right now too, because they've always been considered to be a cannabis stack because of their buy-in with Canopy Growth. And they are making, aren't they still making like drinks and all of that? Canopy Growth and Tilray as well, Tilray, you can think of Canopy Growth and Tilray kind of along the same lines. They're these big Canadian growers that have consolidated with other companies and then try to get into sort of the broader consumer package, good side.

So along with cannabis, they're trying to get into the CBD beverages or cannabis infused beverages and Tilray's buying breweries in the US. Tilray's chart looks even more brutal to me. But anyways, but yeah, like I was reading Tilray is more on the wellness side. Is that the area that they're trying to kind of pivot towards too?

They're trying to get into really being as diversified, especially in the moment. So they have CBD and hemp-based foods and oils and supplement business. So they're just trying to have as many different pockets as they can grow in that's not just the core cannabis business, which is obviously struggling at the moment. So they're trying to expand as much as possible.

They've gone through, they've bought up other smaller players and that's gonna be kind of like the name of the game for now is just surviving the current kind of struggles everyone's dealing with until more legalization happens in the US or the Safe Banking Act or the Safer Banking Act or federal legalization. And then maybe just as there's less and less competition, because that's the thing too, there were so many of these small players in Canada and everyone was just racing to lower their prices while growing so much that it became kind of like a race at the bottom in terms of these prices. And then obviously the taxes are really high in a lot of these companies too. Another thing that it's worth mentioning to anyone listening is because of the gray legal area that it's still operating in the United States, even in states like California where it's been legalized for a while, there's huge black markets still because quote unquote, legacy users or people who were smoking marijuana before it was legalized had just gotten used to buying it that way and it's much less expensive because they're not getting taxed out the wazoo.

So that's a big key to the entire industry is that there's still a whole market undercutting these legal businesses. Yeah, I'm always surprised that the cannabis industry in Illinois actually is performing much better than the one in California, even though California is much bigger and that's because apparently in the Midwest we weren't buying it off the street in large quantities like they were in California. So we tend to trust the dispensary system more here than like out on the black market. So we are paying the taxes much more here in the Midwest.

So yeah, it's just like a state by state, you know, thing going on on the tax side of it too. Yeah, and there have been some states that are trying to work around that tax I mentioned on the federal level. So there that 280E there's been some states that then try to like relieve your tax at the state level but still they can't do anything about the federal level. So as we said, it's a complicated business to be in but obviously it's good to see that there are still people who are really like long-term advocates for making this happen and there's a lot of people in this business that see the light at the end of the tunnel even though it's pretty dark at the moment.

I don't know if you wanna like go into some other businesses to touch on some other stocks but. Yeah, but before we leave these, so it sounds like you're actually kind of bullish on Tilray and canopy growth even though the charts are terrible but maybe that's because the charts are terrible, right? So Tilray, I had the chart up still for Tilray, five years it's down 97% there and it is just under $2 now a share. You know, so it sounds like you're kind of thinking if you do have a longer term horizon that most of the sell-off is done in these.

I mean, just in terms of the numbers themselves I would say that they can only go so much lower in. Yeah, if you, I don't wanna offer up some suggestion of like, but even if you had a hundred bucks or something and you have any hope of this industry over the long haul it kind of just see it as a huge home run style play which is essentially what this portfolio has been since the beginning. I didn't take it over when it started but cannabis investing is a home run style hitter like big, big swings and misses and you're in this for the long haul and maybe one or two of the companies you invest in, say five, 10 years online turns out to be a big winner in the industry and turns out to be like the Budweiser or Coca Cola of cannabis in the US. And that could still happen.

It's just, it's certainly been a rough patch but yeah, Tilray and canopy growth, they've made it through this far. They're doing all they can to weather the storm and kind of see where they are in a couple years. Yeah, and if you want something more stable obviously constellation brands which I just put the chart back up for that one, STZ is the ticker. It's not, you know, it's chart doesn't look anything like the other ones but here to date it's up only 1.4% and it's kind of moving sideways here but it has the big business in the beverages as you mentioned with one of the most popular beers in the United States right now.

It pays a dividend yielding 1.5%. So this is a business that has some cannabis exposure but it's not solely cannabis. So what's your take on a business like this? Someone just kind of wanted to get a little bit of exposure.

Yeah, I owned a constellation in the portfolio for a while. It had done really well. It went on a big run kind of from the beginning of January until sort of the summer sell off and then got a little overheated and then it kind of got caught up in just that broader downtrend and it hasn't really caught up since even though the business has done really well. And as I said, Modello is propping up all their negativity from canopy growth.

So yeah, I think if you want to have exposure to the wider cannabis space without directly trying to bet on one of these really low price pure play stocks, certainly worth considering looking there. And you would consider it a value here or on this pullback? Yeah, definitely. I like the stock itself is only up 20% of the last five years.

So that's underperforming the market. But if you want to have it as part of a diversified portfolio, it's certainly not a bad business. The business is strong. As I said, and it's very diversified.

It's outpaced the consumer's tables market over the last five years where consumer's tables are only up 2%. They're up 20%. So if you see it as a broader kind of consumer staples, how call it beverages slash cannabis play, it could be a good business and then have a huge potential upside, say years down the line. Let's turn over to the real estate side, because that's an area that most people don't think about when they think about the cannabis or pot stocks.

And real estate has also become quite a huge business over the last five years or so. And one of the biggest names in the real estate side is innovative industrial partners, I-I-P-R. It's a six-year problem. Oh, sorry, properties.

You own this one in the portfolio. I used to own this one in the Zacks Value Investor during the pandemic. We bought it and then it hit our stop. We got out.

I still own it in my own personal portfolio. I never got out, but I'm putting up the chart here. And you can see in 2022 is when it hit our stop and we got out, the stock has gone lower since then, like a lot of stocks have off of those, you know, pandemic highs and year to date, it's still down 21%. And over the last five years though, it's up 44.2%.

And this one is a REIT. And they own the actual real estate that all this stuff is going on about like the dispensaries or some of the like labs or, you know, places where they're growing the actual cannabis. And this is an actual business on the cannabis side that is making money. Yeah, and as you said, because of all of the regulations and lack of ability, excuse me, like availability of these businesses to get any real loans or work with banks, they've become the go-to lender.

So yeah, they have a lot of businesses they work with in the legal cannabis space kind of all across the country. And as you said, they are making money. They're paying a dividend. The stock has fallen off its highs.

But it certainly is not plummeted like a lot of these other peer play, totally peer play cannabis stocks. But the growers I should say, because this is a peer play cannabis stock. Right. And we do have to clarify, they have had issues in the last couple of years with some of their partners and the ones that have the leases, you know, not being able to pay.

There was a big one in California that wasn't able to pay because the price of cannabis had plunged there. And they were trying to compete with the black market. It wasn't working. So they couldn't pay on their leases.

But they've worked through that. And then I saw in their third quarter earnings report that there was another property in Pennsylvania that also isn't paying, I think it was $2.2 million there. So there is an occasional one like any business and any real estate where, you know, something's going on and they can't pay the lease. And but so far it seems like IPR has been able to maneuver around that.

They've worked with their lease guys, their partners as they call them, to try to keep them in it. Or a couple of times they have had to take back possession of the property, and then they're gonna have to release that out. But I did see in the third quarter, they're 97% being paid right now. So that's a pretty good number.

And they have been raising that dividend because as a REIT, they have to pay out the certain percentage of the income back to the shareholders. And through September, I saw that they are up 6% on that dividend payout to their shareholders. So we'll see what happens going forward here. They basically are able to grow their business by more states passing it to legalize it on a recreational or a medical use, either one.

And so now I'm kind of optimistic, you know, since Ohio is the latest, it just passed, it is a big state. I kind of took a look at their news feed before we went on the podcast to see if they've said anything about expanding in Ohio. And recent, there was no recent articles about it. But I'm assuming since they've expanded in every other big state that has, you know, passed either medical or recreational that they would be interested in going in there.

And then I saw something else that was also interesting. So people might be wondering, well, if there's no banking in this industry, how did IPR get the money to go buy the buildings and all that? And they've always done a lot of secondaries where they raise money off the share price to get a bunch of cash and then they reinvest it back in the business. But in the third quarter, I did see that they took out a loan from a commercial bank revolving credit line for $30 million.

It's not due until I think like 2026 or something. But that gives them a little bit more of a wiggle room just kind of, you know, to have that cash there if they need it. And that's a positive development in this business because it is like a legit commercial bank deciding that this business is worthy of giving a line of credit on. And so I feel like that's a positive thing.

But these shares are really cheap right here, trading around eight times, I think forward. And you do get that big dividend, it is a legit dividend, almost 9% right now is the yield because these shares have come down so much. So yeah, they're down for the year again, but I've been dollar costing averaging because I did get in much higher. I can't remember what year it was that I first bought in whenever the value investor bought in.

I've been 2020, I wanna say, but I'm at a much higher average cost on my shares. So I do see this as kind of a buying opportunity, but what do you see then? Do you think that this is a value here? Yeah, so I got back into this stock.

I think when we pulled up, I think I got back into it over the summer. The exact date was, I bought back in on June 15th to IAPR just because I was looking at some technical charts and as you said, some valuation levels. And I just thought the near-term bottom was in. And at the moment, it seems like that has played out well.

We're up about 10% on that stock since then. Obviously, there's been some ups and downs recently, but it's back above some key moving averages. As you said, there must be some report was pretty solid. And as you mentioned, they're operating kind of everywhere the cannabis is legal recreationally.

I think they're in 19 states at the moment over 100 properties. So they're definitely diversified. So if they have a couple bad apples pop up, it's not going to hurt them in the long run. And as you said, getting that exposure from a established commercial bank does prove that someone thinks this is a viable business in not just kind of a fly-by-night thing that's going to be gone soon as and later.

Now, there are a couple of other reads that have formed out there that are competitors of theirs in the same business, but they're much smaller. And I kind of took a look at those and that neither had any kind of zacks rank. So I ignored them basically, but there are a few other competitors. But as I said, they're a lot smaller in size.

Okay, so we covered real estate. We've covered the actual kind of growers and beverages and food and things like that. What about on the drug side? So the last time I did one of these podcasts, I know that I talked about GW Pharmaceutical, which was at that time, the only drug company because they were British, who actually had a approved drug that was cannabis based for childhood epilepsy.

And so that was a big deal because everybody was really hopeful again, like, hey, there's going to be medical uses for cannabis and this could open up a whole nother market. GW Pharmaceuticals was actually bought out in 2021 by jazz pharmaceuticals, J-A-Z-Z. But it's just gonna be a small percentage of what jazz pharmaceuticals overall businesses. So I don't really feel like, or maybe you can buy jazz to get access to the GW Pharmaceuticals side where they do have this cannabis drug, but really their whole portfolio is gonna drive this stock.

And I brought up the chart for jazz and five years, it's down 10.5%, but these years are down 25%. And it doesn't look like you get a dividend with it either. So what are you thinking, and what do you know about any of the medical side, like the drug side, like GW Pharmaceuticals was in? Is there anything else in development that's out there that we should know about?

So I did own jazz for a while. I actually had to recently sell it just because it kind of reached a loss of discomfort with, as you said, they own GW, Abadiolex was the drug you're referring to that helps treat various seizures, really at this point various syndromes. And they're still, obviously, they're talking their own book, but they're really optimistic in the long term kind of, and they keep using the phrase blockbusters or status where Abadiolex, it's getting approval in more parts of Europe. I think they were talking about Japan recently as well, but as you said, the stock itself just, it's kind of been, just, if you look at the chart in the last 10 years, it's kind of just swung up and down and up and down, and it seems like it's kind of gotten caught in a way where it's almost a trader's stock as well.

That's how it seems to me, because, excuse me, the most recent report was actually pretty solid. The last couple of reports have been pretty solid. The guidance was solid, and the stock just doesn't hold up, and there seems to be little demand. So in terms of other stocks that people can really buy that have the CBD or Canibbean-Oi-ed based offerings, they're really non-out there at the moment.

Johnson & Johnson has a small sector of its business focused on some upstart things that have a company that has some small Canibbean-Oi-ed based drugs in the pipeline and offerings, but it's such a microscopic part of their business that it's hard to say, it's worth buying at the moment, and Johnson & Johnson has been crushed. It is a stock, I own in the portfolio, just because we're trying to get exposure to as many different areas as possible, but that stock has been hammered. They had the separation of their consumer side of the business, so Tyler and all that stuff is now a totally new company, so that's impacting the stock as well. But yeah, the big hope of GW and Abdye-Lx has kind of not fallen off a cliff or anything, but it doesn't seem like as many other companies have really been able to build on top of that, at least anything commercially available yet.

And as you know, the whole wider pharmaceutical industry, and especially these upstart companies that don't actually have a drug that's on sale yet, or are on trial, those are tough businesses to be in in terms of picking stocks and investing in stocks. So I can't recommend anything at the moment that's gonna get you exposure to cannabis-based medicine that's gonna benefit you in any way in the near term. I see that jazz pharmaceuticals is trading at 6.5 times earnings, so that's pretty cheap, and I brought up the detailed estimates, and this year earnings are expected to be up 40%. That's pretty dramatic.

I know, that's, I was so disappointed in the stock performance because everything there seemed to say, it was going well and revenue is supposed to go up even higher in 2024, and earnings are supposed to grow on top of this big strength this year, and the stock just doesn't seem to follow. Yeah, that's definitely a value type of situation. And then just even looking at 2024, you see another gain of 10% with a nice jump in the earnings for 2024. So I wouldn't call this any kind of value trap here because we do have the earnings growth both this year and into next year.

So that's what I like to see while the street still rejecting the stock and as you mentioned. So I don't know, maybe it might go even cheaper here, then even us value investors might be interested in something like this. Yeah, right, eventually, I mean, that's what I keep saying in all my newsletters is eventually things become too enticing to pass up, even if it's more of a near-term play. Eventually, these companies are running viable businesses that have actual earnings and they get to a point where you're thinking, how is no one touching this?

Yeah, so maybe we've come full circle on the pot stacks. You know, they started off kind of, well, they did start off kind of crazy and super hot people called it a bubble, especially like Tilray when it first came to the market. And now we're in the other side of things where nobody wants to touch most of these and now they're really cheap. So it sounds like, you know, from our question to start this podcast, are these values or traps?

We're basically both kind of agreeing that they seem like values. Yeah, I mean, it went through such a crazy hype at the beginning and then for everyone to get excited kind of in little spurts and just to be continually disappointed, I feel like at this point, all of the negativity could be as close to price than as possible. So if you're a longer-term investor who's relatively bullish on the wider legalization of cannabis in both the US and other places, I mean, it's legal in all of Canada, Germany is getting closer to possible federal legalization. That's kind of the economic engine of Europe.

So these are big powerful countries that are supporting this and you would have to think more countries would follow. And as we said, like 10 years ago, this industry was hardly anything. I mean, Washington and Colorado legalized in 2012 for adult use. And now Ohio just became the 24th state.

And I just want to stress once again that it's not, it's now just kind of all different states. I mean, Missouri has legal adult use cannabis. People don't really think of Missouri as like a place that would legalize weed for lack of a better phrase. So I think it is just something where it's happened so quickly, but in terms of these long scale things, it might have to take a lot longer for these stocks that really turn around.

But long term, I would think that we have to be near the bottom, because just so much pessimism is priced in. And the ball is rolling at the federal level. It's just kind of wobbling at the moment. But it's going in one direction.

And that is towards more legalization, even if it's just every state legalizes federally or every state legalizes, recreationally and medically. And then the federal government's just kind of forced to act. It's going in that direction. It's not going to reverse course anytime soon.

Right. OK, so let me recap the stock tickers we talked about on this episode. There was Canopy Growth, which is ticker CGC, Tilray, TLRY, Constellation Brands, STZ, Innovative Industrial Properties, IIPR, and Jazz Pharmaceuticals, JAZ, that one's easy to remember. And be sure to turn in for all of our podcasts, because we are covering all of these interesting types of topics.

And the end of the year is coming soon. So we'll be covering the end of the year topics, like what's going to happen in 2024? And are we going to have a recession? Yes, we're back to that again.

So be sure to get us somewhere. Get us on Apple Podcast. You can get us on Spotify. You can get us on Amazon Music.

We're also on SoundCloud. And be sure to get the video podcast on YouTube at zax.com slash YouTube. But be sure to get us somewhere. And I'll see you again next week with some more stocks.

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