This Controversial Industry Is Here to Stay

It’s hard to tell when a stock is at the end of a strong run, or if the broader market is running out of steam.

But one thing to look for is how stocks react to bad news.

The more sensitive the stocks are to the bad news, the closer we are to the end of a recent rally and possibly going into a bear market.

On the other hand, if negative news has little effect, then the stocks still have room to run higher.

One particular group of stocks went through this just the other week.

There was an announcement that had the potential to put companies out of business, yet, despite an initial negative reaction in the stocks, shares have rebounded and held steady.

This is one industry that I honestly haven’t followed that much yet, as it is somewhat out of my wheelhouse. But the way the group as a whole reacted to the news recently has convinced me it is here to stay, and if you don’t have exposure to it yet — now is the time.

Marijuana Stocks: A Movement

The industry is marijuana stocks.

And I know, a lot of people have avoided these stocks because, well, let’s face it — it’s a drug that is illegal in most states.

That’s the same reason I haven’t followed it much. I’m not really a fan of the movement.

But after I saw how marijuana stocks reacted, it has me convinced the movement is here to stay, and apparently, more people in general are jumping on the bandwagon.

Now that the majority of people seem to be in favor of legalizing marijuana, aka cannabis, the movement may be here to stay.

That’s why a recent announcement that shook the industry was so important — I wanted to see how the stocks reacted.

U.S. Attorney General Jeff Sessions announced plans to roll back federal policies that paved the way for states to legalize marijuana — the policies that have allowed marijuana stocks to flourish and raised expectations for recreational marijuana to be allowed in more states.

This is when publicly traded marijuana stocks tanked on the news. Some were down more than 30% because, like I mentioned, a ruling like this is potentially sending many of these stocks into bankruptcy.

I was watching it as the news developed, and I bought my first marijuana stock on the dip. The buzz around the office was that the movement wasn’t going to end — and many investors feel the same way.

If you haven’t dipped your toes into this speculative trade yet, there’s still time. I have two stocks for you today that will reap the benefits as the movement stays intact.

Speculating on Marijuana

I’ll precede these two stock picks as speculative plays. Speculative because, indeed, a change in jurisdiction in the U.S. could put many marijuana-related companies out of business, and the two below would not be immune to such a change.

Plus, they each depend on further advancements in the recreational marijuana movement, which may or may not happen. So invest with caution, but it is an industry that needs to be on everyone’s radar at this point.

The first is the largest U.S.-traded pure marijuana stock — Canopy Growth Corp. (OTC: TWMJF).

Yes, both of the stocks I mention today trade on the pink sheets, or over the counter. These are stocks that typically have low volume and are risky bets. But with marijuana stocks, it’s where they are all listed and still have plenty of volume.

Canopy Growth is actually a Canadian stock that’s listed in the U.S. on the pink sheets but has an average daily volume of more than 1 million shares. The company has the highest individual market share in Canada’s medical marijuana market and will be poised to benefit a lot if Canada approves recreational marijuana use, which is expected to be passed in the coming months.

The other is Cannabis Science Inc. (OTC: CBIS). This company sells marijuana-based pharmaceutical and recreational products. It is opening two licensed dispensaries in Los Angeles this month and plans to open one more this quarter.

If you want exposure to a possible booming U.S. recreational market, this is the stock to own. It is traded on the pink sheets, but it has an average daily volume of nearly 30 million shares, so there is plenty of liquidity. However, it is a “penny stock,” trading at just $0.10 at last glance.

Again, these are speculative trades in an industry that is not quite established yet. But considering the way these stocks have held up despite major negative news, they’re stocks you should have on your radar.


Chad Shoop, CMT

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3 Winning Tech Stocks from the Consumer Electronics Show

It’s always interesting to see what technologies are highlighted at the annual Consumer Electronics Show (CES) in Las Vegas. I use it, and so should you, as an insight into the next possible investable technology trends. After all, the U.S. consumer electronics industry’s revenues in 2018 are expected to come in at about $351 billion in 2018.

Some of the technologies on display at this year’s show were augmented and virtual reality devices, robots, and artificial intelligence (AI). But the real focus of this year’s show were the automobile and the automotive parts companies and the seemingly inexorable move toward autonomous vehicles.

More on that a bit later… first, I want to fill you in on some of the other highlights of this year’s CES.

Will VR Ever Become Mainstream?

Two companies were front and center when it came to virtual reality (VR) at CES – Facebook (Nasdaq: FB) and Alphabet (Nasdaq: GOOG). Both are still trying to persuade consumers to buy VR headsets. But with little success… the segment is expected to generate only $1.2 billion in U.S. sales in 2018.

Facebook’s Oculus Go sells for $199, while VR headsets based on Google’s Daydream VR platform, such as a device from Lenovo, sells for almost double that amount.

I think neither company will make a success of their VR efforts. To me the best in the sector is Sony (NYSE: SNE) with its high-end Playstation VR headset. It has sold over two million units of this headset in 2017, which is impressive since it only launched in October. Gaming may be the only market where VR truly becomes mainstream.

Alexa, Make Me Money

Now, let me tell you about an interesting note at the start of the conference that came from the show organizers. They said that sales of the item that has brought the consumer electronics industry the type of growth it has not seen in years – smart speakers – will peak as soon as next year. They pointed to the ‘hockey stick’ growth in sales that hasn’t been seen in eight years, since tablet computers became a mainstream product.

The leaders in the smart speaker space are, of course, (Nasdaq: AMZN) and Google. U.S. sales of these speakers soared 279% in 2017 over the prior year to 27 million units. Sales are forecast to rise another 60% in 2018.

I believe there is one true leader in this space, with Amazon’s Alexa being almost everywhere.

This gives you just another reason as to why Amazon is a must-own stock. At CES, vendors showed off Alexa-powered headphones, smoke alarms, cookers, showers, light switches and even mirrors (for an extra $350).

And even you leave your home and hop into your car, you may find Alexa. Amazon announced an agreement with Toyota to add Alexa to some Toyota and Lexus vehicles. Toyota thus joined a long list of auto companies – FiatChrysler, Nissan, Daimler, BMW, Hyundai, and Ford – that are either letting Alexa into their vehicles or integrating the voice service into the connectivity systems that link customers’ cars and mobile phones.

Since we’re talking about cars, let’s move on to the highlight of the 2018 CES – the automobile of the future.

Nvidia and the Automobiles of the Future

Let me start by talking about a company that was unavoidable at this year’s CES – Nvidia (Nasdaq: NVDA). Their graphics processing units (GPUs) are at the core of many machine learning and artificial intelligence solutions, including for automobiles.

Nvidia’s stock soared after it announced that it would be partnering with Volkswagen to build an intelligent (AI) co-pilot system. The system that will gather data from both in and outside the car and will use some gesture and natural language voice controls and finally combine all that with what the AI has learned about the driver. And voila – you have a helpful AI assistant. It is expected this type of system may be available as soon as 2022.

Related: 5 Growth Stocks to Ride the Semiconductor Supercycle

In a similar vein, Uber also announced that it will power its self-driving cars and trucks by using Nvidia’s AI technology.

Nvidia also said that as part of its DRIVE Pegasus (PX) AI platform, the Xavier processors would be delivered to customers beginning in the first quarter of this year. Xavier is the culmination of a $2 billion investment to expand processing power and capabilities to the autonomous vehicle marketplace.

Auto Parts Companies Nirvana

The other companies I am focused on when it comes to the future of the automobile are the auto parts firms. At whatever auto or technology show they attend across the world, they are like kids in a candy shop. And for good reason…

Currently, the vehicle manufacturers still largely control design, and nearly every other important aspect of vehicle production. But that is slipping away from them as the wave of the future is more electrical systems and electronics and not mechanical systems.

Estimates are that 50% to 70% of the value of a car in the future will lie in those electronic components, which the automakers purchase from other companies. Some of these companies, ironically enough, were spunoff by U.S. automakers years ago because Wall Street told them they were low-margin, no-growth businesses.

There are a number of very good auto parts stocks for you to choose from. Here is just one example:

A company to consider is Visteon (NYSE: VC), which designs and manufactures electronics products for automakers. Visteon provides everything from standard gauges to high resolution, reconfigurable digital 2D and 3D displays to infotainment and audio systems.

At CES, Visteon introduced its DriveCore autonomous driving platform, which is the first solution that allows automakers to build such solutions in an open collaboration model. It also unveiled its all-digital cockpit of the future with reconfigurable instrument clusters and advanced display technology along with driver monitoring, ADAS integration and other features.

I also like the fact that the company has considerable global exposure. It is enjoying strong sales in China, which is Visteon’s highest profit region. These trends together should keep the stock motoring ahead, adding to the 52% gain over the past year.

Yet, Visteon is not my top recommendation in the sector. I just revealed that company in the January issue of Growth Stock Advisor. At CES, this company showed off a fleet of driverless BMW cars that had no problem navigating the busy streets of Las Vegas. The cars dealt with traffic lights, slower and faster cars nearby, lane changes, right and left turns, jaywalking pedestrians, and faded lane markings. Only once did the driver take over, and that was to steer around pylons in the middle of the road.

As the 2018 CES brought to the fore, some of the most exciting technologies are centering on the future of the automobile. Stay tuned for even more excitement to come from this sector adding capital gains to your portfolio.

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Source: Investors Alley