Every year, Warren Buffett publishes a “letter” to Berkshire Hathaway Inc. (NYSE: BRK.B) shareholders. These letters have become the stuff of investing legend; a frank, funny, unflinching, and honest review of his past year’s performance and a clear-eyed outlook for the year ahead.
There are lots of ideas in the letters that stick with you, but in his 2020 assessment, Buffett made a striking revelation: He said most of his company’s value resides in just four businesses. In fact, he called them his “jewels,” and he revealed they’d make him his biggest gains…
- Berkshire’s insurance operations
- BNSF Railway
- Apple Inc.
- Berkshire Hathaway Energy
Extraordinary: Buffett, via Berkshire, owns anywhere from 6% to 100% stakes in 18 different companies across the market… a huge portfolio, and he’s able to boil it down to four “jewels.”
And you know what? Your cannabis holdings shouldn’t be a bit different. I’m not suggesting Warren Buffett should build a cannabis portfolio… though he may come around someday. Buffett famously owns businesses he understands.
For investors who understand cannabis like we do, with an intense focus on growth potential, the four-jewel portfolio makes a lot of sense, and here’s why…
The Most Valuable Cannabis “Jewel” of All
The National Institute for Cannabis Investors has researched a market-crushing model portfolio. Gains of 92.1% on closed positions – winners and losers included – and 76.33% on winning and losing open positions.
And yet, we have four jewels of our own, two of which are currently up over 100%. These cannabis firms can be like “catalysts” for big gains across a cannabis portfolio, because, as legal cannabis sales in the United States climb toward $45 billion by 2025, these companies stand to reap the bulk of that revenue. That would in effect supercharge returns.
But Curaleaf Holdings Inc. (OTC: CURLF) is so important to the industry, its past performance and future potential are so vast, that it belongs as the centerpiece in everyone’s cannabis portfolio.
It’s the “shiniest” jewel, if you will.
How shiny? Well, NICI Executive Director Don Yocham has a $35 price target on this stock by the end of 2021, which would put gains north of 150% from today’s levels.
It’s not hard to see why that target is so high; Curaleaf has imperial-scale ambitions for the future – and the vision and business chops to execute on those ambitions in 2021 and beyond.
Curaleaf Will Be King of the Growth Stocks
Know how “Coke” is shorthand in a lot of places for “soda” – how people hear the word “soda” and think of Coca-Cola without realizing it? I think Curaleaf stands every chance at becoming a global consumer shorthand for “cannabis.”
This company already boasts 106 dispensaries across 23 U.S. states. Telegraphing its global plans, it recently acquired Emmac Life Sciences, the largest vertically integrated cannabis operation in Europe. Europe was a “mere” $359 million market in 2020, but Executive Chair Boris Jordan and CEO Joseph Bayern believe Europe could ultimately prove to be a $120 billion cannabis market.
Over the next decade in the United States, walking into a cannabis dispensary to buy a pack of pre-rolled joints will be just as commonplace as it is right now to go into a liquor store and buy a six-pack of beer. Boris Jordan knows that, and the acquisitions and market positioning over the past few years put his company “pole position” to make the most money as the United States is expected to become a $45 billion market by 2025.
Curaleaf wants to reach the 93% to 95% of U.S. households that don’t currently consume cannabis. To do that, it will eventually become just a processor and manufacturer of cannabis products.
That will cut out the cost of grow operations, and it will also allow the company to focus more on its branding to stand out from the crowd. “We’re making the products much more mainstream for our customer base – we’ll be no different than Coca-Cola or Frito-Lay,” Johnson said, putting a fine point on it in an interview with Forbes.
Curaleaf has a place in every growth-focused investor’s portfolio. Cannabis has been called the “Wealth Play of 2021” for good reasons. The AdvisorShares Pure U.S. Cannabis ETF (NYSEArca: MSOS) that tracks American multi-state operators (MSOS) has seen impressive returns of nearly 13% year to date, whereas the S&P 500, in this exceptionally good year, is less than a percentage point higher.
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Source: Money Morning