Stocks > Politics

Stocks finished higher yesterday, with the Dow leading the major averages to their third-straight day of gains.

But investors are more focused on what didn’t happen last night…

Trump’s prime-time address didn’t end with the White House declaring emergency powers to begin construction of a border wall (or any other outrageous demands, for that matter). In fact, it offered no new shocking information that would weigh on stocks. The shutdown continues. That’s all we need to know.

I watched futures intently during last night’s address. At no point did the market flinch. So far, the noise is contained and we can move on to more pressing matters — like resurging pot stocks!

When we last checked in on the emerging legal weed sector in November, pot stocks were soaring following the firing of Attorney General Jeff Sessions.

Sessions had been a thorn in the legal weed movement’s side for some time. In 2017, he even said he would work to revoke the policy that allows states to make their own rules on marijuana sales without the federal government stepping in. With Sessions gone, little appeared to stand in the way of a pot stock stampede.

But the stock market had other ideas. The fourth-quarter correction took most of the air out of the quick November rally, and the herd looked elsewhere for quick gains. In the meantime, the popular weed stocks consolidated. Now some of them look coiled and ready for revenge.

Check out this beautiful chart of Tilray Inc. (NASDAQ:TLRY):

TLRY

TLRY posted an incredible run over the summer, with shares jumping from $20 to more than $200, which skews this view a bit. It doesn’t look like much on this chart — but Tuesday’s move is a 15% gain. The long coil looks like it could lead to a major run if Tilray can harness its newfound momentum.

Looking beyond potential breakouts, we’re starting to see a major unintended consequence of the new pot boom emerge: a supply glut.

“Three years after its recreational cannabis law went into effect, Oregon is experiencing a growing glut in its marijuana supply,” The New York Post reports, “driving down prices and putting many of the industry’s licensed growers and retailers on precariously thin ice.”

Right now, there’s 1.3 million pounds of unsold legal weed sitting around in Oregon, the Post notes. Thanks to federal regulations, these growers can’t simply ship their unsold bud out of state, either.

Just check out this picture they ran with the article:

POT

I’m no pot expert, but if you’re using a snow shovel to move your product, I’d say you’re sitting on a serious stash. Some of these growers are even shifting to hemp as they wait for a bill that would legalize weed exports, the Post notes. But that could take years.

Which legal weed stocks can survive — and potentially thrive — in this environment? Click here before Jan. 14th to find out…

Maybe “discount weed” is the answer to the industry’s oversupply woes. After all, we’re seeing dollar stores post impressive rallies to start the year.

You might recall our fascination with extreme discounters like Dollar General Corp. (NYSE:DG) in early 2018. In fact, I cut loose a DG trade at the end of August for a cool 20% gain.

But with headline risk focusing on fallout from tariffs, we moved on to better opportunities later in the year. During the fourth quarter, Dollar Tree Inc. (NASDAQ:DLTR) was feeling the heat from Chinese tariffs. The dollar stores were forced to shell out extra money for their cheapest import products, many that are only made in — you guessed it — China.

DLTR has since snapped out of its funk, thanks in part to activist investment firm Starboard Value, which has laid out a plan to boost the stock, Barron’s reports. Starboard thinks Dollar Tree shares are, well, too cheap. It wants to see the company sell half its stores as part of its plan.

For what it’s worth, Wall Street is on board. The stock is approaching nine-week highs on the news.

DLTR

Want to see how I’m trading the extreme discounters today? Click here for my latest trade…

Sincerely,

Greg Guenthner

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Greg Guenthner

Greg Guenthner, CMT, is the editor of Opening Bell Fortunes and Seven Figure Signals. He has been with Agora Financial/Seven Figure Publishing since 2005. In 2019, the average position in Greg’s Sunrise Fortunes portfolio outperformed the S&P 500 by 1.65x.

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