The usage of psychedelic drugs as a therapeutic tool will have an enormous payoff for patients who are seeking new ways to cope with mental health issues.
But the advancement of psychedelics is also going to have massive payoffs for early investors in companies that provide these therapies.
We are already starting to see a handful of psychedelic therapy companies and psilocybin research firms begin to trade publicly. For example, in the past month alone, we’ve already seen four psychedelic companies join the public markets.
As the market heats up, we are surely going to see a lot of research about which of these companies offers the best opportunity for investors.
We’ve seen this happen with cannabis in 2019… and crypto in 2018.
A new market shows signs of legitimacy. Retail investors catch wind of the newest trend and begin to speculate. And soon enough, so called “experts” from all corners of the internet start predicting market winners and losers.
But we’re here to tell you something different.
The Wrong Way To Invest In Psychedelics
Searching for the best of these companies right now is precisely the wrong way to invest.
Trying to select the winners in an infant industry is like looking around the hospital nursery to choose the most successful adult.
It cannot be done.
You can adjust for some factors like the parents’ wealth and education levels, but that is far from infallible. Plenty of rich kids go wrong, and plenty of people with less wealthy backgrounds go on to achieve fame and fortune.
We can look at this infant industry and favor those with the strongest backers. Right now, that would give a considerable edge to COMPASS Pathways (CMPS).
However, we are so far away from this business, gaining all the regulatory approvals and legal changes needed to thrive, that it is impossible to know who the big winners will be.
What we do know, however, is that the winners are likely going to be huge.
Go back and look at the maximum gains that were possible for early stage investors in cannabis companies.
Early investors measured their gains in thousands of percent.
MariMed (MRMD) offered early investors a potential return on investment of 4,733% at the peak. When the stock was trading at $.12 in April of 2014, there was no reason to suspect it would be one of the biggest winners of all the cannabis stocks.
A lot of people got rich by investing in cannabis.
And the same opportunity exists with psychedelics.
But your best chance for outrageous success as a psychedelic investor is to forget what you think you know about investing.
Traditional Fundamental analysis?
Forget about it.
Forget about it.
Psychedelics is an infant industry. This is as close to venture capital investing as individual investors can get.
To succeed, we need to think like a venture capitalist.
Embracing the VC Mindset
A venture capitalist expects two out of ten of his investments to work out. The wins are so big, that’s all they need to get rich.
They have no idea which of the ten it will be when they make the initial investment. They think all ten have the potential, but there is no way of knowing which two will be the big winners that make them rich(er).
The idea is to invest a little bit in all of the psychedelic companies as they become public companies.
Like all infant industries, there will be frauds, and BS deals put before the public.
We will do the research and due diligence to help you sidestep the obvious garbage. We have been investing in infant industries and companies for a long time, and we know crap when we see it.
When we see it, we will tell you.
You want to have a portfolio that consists of a little bit of all the companies that have a legitimate shot at being one of the handful of winners in the psychedelic industry.
As time goes by and the industry moves closer to legalization and widespread acceptance, we will be able to handicap some of these companies based on their progress and own a little more of some companies and a little less of some others.
If this plays out as cannabis did, we will eventually see the IPOs of companies that fund research and work with other psychedelics companies to help move them closer to the finish line. These companies operate a lot like a venture capital fund for the industry and can provide massive returns for early investors.
We do not know which of the psychedelic companies currently trading will be the moonshot 100-to-1 winner in the industry. We think several of them have an excellent chance, but it is too early to be a handicapper.
We will buy them all and let time sort them out.
A 20%-win rate makes us an enormous amount of money. Anything higher than that, and we make more than ever thought possible.