Why Gold and Weed Could Save Your Portfolio

There are two types of stocks that could see you through any more market volatility, and that’s gold stocks and cannabis stocks.

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When investors think of defensive stocks, it’s clear the types you think of. Those tend to be in energy, the Big Six banks, utilities, and other blue-chip-type companies.

Now, I would certainly never say you shouldn’t have those among your portfolio. But when it comes to getting defensive during a volatile market, it’s important to have a diverse range of stock options. These could be what make or break your portfolio during any downturn.

So, let’s dig into why you should be adding not just gold stocks but cannabis stocks to your portfolio. Should another market crash or correction occur, these stocks could be what keeps you above water.

Cannabis stocks

During the last market crash in 2008, you wouldn’t have been able to put cannabis stocks into your portfolio. That’s likely why you’re squeamish about doing so today. But I’m going to get straight to the point. The legal recreational cannabis market is likely to be worth US$73.6 billion by 2027. Pot isn’t going away. While the bubble may have burst, we can now see clearly that there are a few companies worth your investment for the long haul.

Canopy Growth (TSX:WEED)(NYSE:CGC) is one of them. This cannabis stock is set up to be the dominant force decades down the road. It already is the largest producer of pot in the world, and its expansion plans are drool-worthy. The company’s recent earnings report stated that although it saw a loss of $829.3 million, this was due to restructuring and impairments; read: one-time costs. Management believes it will see profitability in 2021 and potentially even federal legalization. This would mean it could finally put its agreement to purchase Acreage Holdings Inc. upon U.S. legalization to work.

Shares of the stock were up 145% for the year as of writing, but 2,414% in the last five years and nearing all-time highs not seen since the Acreage deal back in April 2019. While it could be prudent to wait for a pullback, holding onto this stock for decades would be like investing in a blue-chip at the bottom.

Gold stocks

It’s true Warren Buffett doesn’t like gold stocks. But that doesn’t mean you can’t invest in mines, and that’s exactly what he did recently. What investors want to look for now are miners with diversity. Instead of picking up the small market capitalization mines, look for those with a diverse portfolio of mines around the world.

That’s what you get by investing in a company like Newmont (TSX:NGT)(NYSE:NEM). The company’s merger with Goldcorp has made it into the largest gold miner in the world. It has mines across North America, into the Dominican Republic, Australia, Ghana, Argentina, Peru, and Suriname. It continues to outpace stock market gains and announced last month a share-repurchase program of US$1 billion.

Shares are up 32% for the year and 79% since April 2019 after the merger, but management clearly believes it could soar even higher. It’s likely there are even more acquisitions in the company’s future, leading to even stronger revenue.

Bottom line

These two companies have the diversity and global exposure you want in any portfolio. Don’t just count them out simply because it’s a downturn. In a downturn, you wouldn’t think to buy cannabis stocks, and you’d think gold stocks would sink afterwards. Not so with stocks like these. You have access to a worldwide portfolio and the largest producers in the industry. Buying these is a great move for any investor’s long-term portfolio.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Amy Legate-Wolfe owns shares of Canopy Growth.

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