It’s only been 24 days and I’m already exhausted by the onslaught of articles about “budding” industries, “bong” bubbles, or “high” hopes for the marijuana industry.
Why can’t we have a serious discussion about an industry that, like it or not, is here to stay?
No one can deny that the legal marijuana industry is among the fastest growing markets in the United States.
It’s estimated that more than $1.43 billion worth of legal marijuana was sold in 2013, and that number is supposed to increase by 64% to $2.34 billion in 2014.
Former managing director of Wells Fargo Bank and editor of, The State of Legal Marijuana Markets Steve Berg recently stated, “Domestically, we weren’t able to find any market that is growing as quickly.”
Presently, 20 states and D.C. have some form of marijuana legalization. And while only two states, Washington and Colorado, offer legalized marijuana for recreational use, Berg’s report predicts that 14 more states will legalize marijuana for recreational use by 2018. He and a host of other well-informed analysts anticipate a 700% increase above the current industry value to over $10 billion…and that’s a conservative estimate.
So, if industry experts expect to see the marijuana industry grow over 700% in the next four years, where are the best opportunities for investors?
I recently screened the 20 most popular stocks in the marijuana industry. “Popular” might be an overstatement considering the incredibly light volume in 15 of the 20 stocks I investigated. Micro-caps look like market giants in comparison. As a result of the low volume, I immediately eliminated 75% of my original screen. I was left with the following five stocks: Fusion Pharm (FSPM), GreenGro Tech (GRNH), Medbox (MDBX), GrowLife (PHOT), Advanced Cannabis Solutions (CANN).
Interestingly enough, four of the companies were on the agricultural side of industry. The only company not affiliated with growing marijuana was Medbox. It’s a manufacturer of “automated dispensing solutions”, code for a highly regulated vending machine for various pharmaceuticals and marijuana products.
But after further research, I quickly discovered that it’s too difficult to fully understand the business models of each of the companies due to lack of available information. And common sense tells you to be highly skeptical when the majority of the information out there comes in the form of a press release.
So, it just doesn’t make sense to invest in such a speculative industry no matter the growth potential.
I suppose you could take the money set aside for your next Vegas trip and buy equal amounts in each of the five stocks I mentioned knowing that there is a very good chance that you will lose everything. On the other hand, you might get lucky and hit the jackpot…stranger things have happened.
I do think opportunities will present themselves once the marijuana industry matures. If more states move towards recreational legalization over the next two years I could see big industry move in, particularly if banks decide to invest in the industry.
For now, the marijuana industry is the Wild West. We could be witnessing the making of future national brands…the question is, are you willing to take that gamble? I’m not…at least for now.
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