I’ve had grass on my mind lately. It’s summer, which means my neighbors are all mowing their grass like mad, and then every time I read the news I find another locale that has legalized grass for recreational use – Las Vegas now? Dear Lord, hide the women and children! Maybe it’s high time we take a serious look at grass, both the kind you mow and the kind you sow – where can we profit, where can we find some good times, and what can we do to address the madness?
The Grass Madness:
The average American spends between 75 – 100 hours per year tending to his lawn. He pours over 17,000 gallons of perfectly good drinking water on it per year, fertilizes it at a rate 10 times the rate a farmer fertilizes his crops, and while mowing he pollutes the atmosphere at the equivalent of a 100 mile car trip with each and every mow. Collectively in America, just the amount of fuel we spill per year doing lawn work is equivalent to the oil spill of the Exxon Valdez, and our total fuel consumption is in excess of 1.2 billion gallons of gasoline + 100 million gallons of diesel to take care of the stuff.
This all equates to the average homeowner spending around $160/month to cultivate grass, which is now America’s #1 crop – 3 times larger than corn, the #2 crop in our nation. Per acre, it costs more to maintain the average lawn than it does to grow some stuff you can eat. If you combined all the lawns in America you’d have an area larger than the state of Texas to mow, water, fertilize, and run the weed-eaters and leaf blowers on. Furthermore, in all the upkeep there are over 22,000 limbs or digits that go missing each year due to lawn care accidents. Sweet mercy, where is the crazy in this???
Kill Me Now:
In the quest for the perfect lawn, Americans spread 90 million pounds of pesticides and inorganic fertilizers each year. Much of this goes wasted too – for instance, if your yard is 10% weeds and you cover the entire yard with a weed and feed, 90% of that herbicide (weed killer) is wasted and of no benefit. Same goes with the insecticides, fungicides, and other fumigants. We carpet-bomb our yards like we’re laying down Agent Orange in damn Cambodia trying to weed out the Vietcong. The “lawn care” aisle at Home Depot looks like candy store for the lawn-crazed American who one Saturday morning finds a wild dandelion near his mailbox and immediately heads to the garden center to buy the ammo necessary to go to wage a weed war. Many of the ingredients in these agents are known carcinogens and specifically known contributors to non-Hodgkins Lymphoma, but what do we do? We coat the lawn, water it down, let it dry, and then turn the dogs and kids loose so they can cover their bodies with poison and then track it back in the house so everyone can enjoy it year-round when they are inside too. Madness.
It’s funny, but when you do a web search for the name of any native grass to Tennessee, the top results will be weed-killers to eliminate them in favor of “imported” species that are not native to our climate – non-native grasses that need water and fertilizing to “push” them along and “protect” them from native grass invasions… Bluestem grass, however, is a viable option for a native grass (and no-mow) lawn.
Obviously there are other alternatives like replacing your lawn with native wildflowers and native ornamental grasses like switchgrass and gamagrass. To my eye, these alternatives are very appealing, requite far less water and upkeep, and provide an alternative to the madness of lawn maintenance.
As we reach the so-called “tipping point” in our environment, when will lawn mowing, grass watering, and the use of synthetic fertilizers produced from oil, mixed with formaldehyde, and then encased in oil-based synthetic polymers become a “no-go”? I’ve yet to see that discussed on a large scale – Americans love, love, love their lawns…
The Man on the Move:
I do not water my lawn. I see no economical benefit to be gained. I no longer fertilize it either, except with wholly organic compounds. My lawn is green, but it’s not all grass – it’s a combination of 3 different grasses, along with clover, broadleaf weeds, and a pesky strain of African violet. I do mow it, but keep it fairly high to allow the grass a chance to combat the weeds.
I do not bag when I mow, I mulch the clippings with a mulching mower – nothing is more mind-numbing than to see folks bagging their grass (which would provide vital nitrogen and nutrients when it breaks down) and then heading to the store to buy synthesized nitrogen and nutrients. Some even put the grass clipping in plastic bags and send them off to the landfill.
I’d love to see us clean up our act when it comes to lawn care. The crap we spray and spread on them is poisoning us both directly through contact and indirectly through our water. There’s no need for it.
How to Profit From Grass (Pt.1):
When I think lawn care I think weekend warriors at Home Depot buying small-engine lawn care implements and gallons upon gallons of Spectracide products off the shelf before heading home with fire in their eyes and dreams of a weed and bug-free paradise just outside their front door. So on this theory, a good trade to capture the lawn care market would be to own HD and SPB. Over the past 10 years that trade would look like this:
Graph from Charles Schwab & Co., Inc.
That’s a 500% gainer over the past 10 years, outpacing the S&P500 by 10-times the money. I wish I’d had grass on my mind in ’07! What was I doing then?
Going to Pot…
Ok, on to more grass – the consumable kind. I will withhold any commentary on marijuana use for medicinal and/or recreational purposes, but I will say I’d much rather be around someone who is high than is drunk – and I’ll leave it at that. I’m fairly Libertarian when it comes to views on marijuana.
Looking at it from a fact-based perspective, there is no denying marijuana is enjoying a massive movement toward the mainstream. Nevada recently became the 5th state to legalize recreational marijuana sales, with 2 more states coming online soon including California, which as a state alone is the 6th largest economy in the world and will license non-medical (recreational) sales beginning Jan.1, 2018.
One in five Americans now live in an area where you can light up a spliff without a note from Dr. Feelgood. Sales of marijuana are on a path to top $20billion annually by 2020. For perspective, the marijuana industry is one of only three consumer industries to have reached $5Billion in annual sales and then grown at a 25% compound annual growth rate (CAGR) over the next 5 years – the other two? Broadband internet in the early 2000’s and cable television in the early 1990’s. Yeah… the grass industry is Yuuugggee! Smoke ‘em if you got ‘em!
Ok, so the stigma is gone and Mary Jane is now as legal as Jack Daniels. Let’s get our party on – but how do we make money on this action aside from getting some Ziploc bags and setting up shop behind the car wash?
How to Profit From Grass (Pt.2):
My first source of research would be MJIC Inc.’s marijuana index. Companies in this index are required to have a material involvement in the marijuana or hemp industry with financial statements filed within the last year, and they must maintain a minimum average daily trading volume of $100 USD. On April 5th, 2017 the Horizons Medical Marijuana Life Sciences ETF (TSX: HMMJ) began trading, and tracks this index in its entirety. Why they did not wait until 4/20 to begin trading I have no idea, but since its debut the ETF has steadily declined 18%. It’s yet to catch fire and see high times, it’s more of a slow declining smolder at the moment, but if you’re looking to focus some investing in the marijuana industry, there is an index for you…
Within the index you will find some interesting components and one that jumps out right away for me is Scott’s Miracle-Gro (NYSE:SMG). You’ve probably dumped some of their goods on your lawn recently, right? Scott’s is the premier supplier for marijuana growers and has acquired several leading companies in the hydroponics area as well. They have a solid presence among professional growers and an active strategy to build relationships with the largest players in the industry. That’s a great “total grass trade” possibility, giving you exposure to both lawns and doobies.
Another is GW Pharmaceuticals (NASDAQ:GWPH), the largest publicly traded biotech company specializing in the development of marijuana-based drugs. They are developing marijuana-based drugs to address epilepsy, tuberous sclerosis, infantile spasms, autism spectrum disorders, glioma, and schizophrenia, just to name a few.
Another is Canopy Growth Corp (TSE:WEED), a Canadian supplier of pharmaceutical grade marijuana. Canada is a few years behind the US in terms of legalizing the stuff (what? I thought Canada was the Holy Land for all things freedom-based…) but Deloitte recently released a report that projected the retail/recreational marijuana market in Canada could grow to $9billion in annual sales once legalized. To put that into perspective, Canopy’s revenue was around $30M last year – there’s a high growth rate possibility there, eh?
Graph from Charles Schwab & Co., Inc.
One caveat – this is a gold-rush scenario where there will be booms and there will be busts, and tread carefully as many marijuana stocks are listed on the over-the-counter (OTC) market as opposed to the NASDAQ or the NYSE, and therefore carry a different risk profile. They may sometimes be illiquid and can be very volatile (see chart). Profits in marijuana may be tricky and risky, but there is money to made with the right moves at the right time.
This is nowhere near enough research into these 3 stocks I mention to warrant buying them, it’s just a cursory glance and (maybe) a good starting point. In an industry of over $5billion/yr in sales, there is money to made somewhere, so this is where I will start looking…
So there you have it. There is madness surrounding it, yet there is money to be made in grass – rather you want to mow it, water it, grow it, spray it, smoke it, or enjoy it as an edible candy or topical cream. Consider getting some green invested in the green and see how high you can grow your profits. Best of luck – I’ll see you at Home Depot – or Taco Bell…