Marijuana Is Big Business In The US, And It’s Still In Its Infancy
Will Marijuana Stocks Go Up?
Since more and more states in the US will eventually adopt legalization of marijuana, this will eventually lead to a massive rise in Marijuana Stocks.
With the 2016 election resulting in more states legalizing the use of marijuana, the total now stands at eight states that allow the reactional use of marijuana and another 28 that how outright decriminalized marijuana altogether.
Based on current actions working their way through legislation that number is likely to grow in the coming years. This means opportunities for investors and the potential for gains well more than the broader market. Click Here To Go Straight To Our Recommended Pot Stocks
The 2016 elections put a full 21% of the US population in reach of legalized marijuana while polling shows more than 60% in support. The 32 states with some form of legalized or decriminalized marijuana house 32 million admitted users, a full 10% of the total US population, 8 million of which say they use daily. Assuming that legalization does go nationwide this means there could be as many as 180 million legal marijuana users in the not too distant future, an increase of 560%.
Along with this is a growing number of legislatures and lawmakers who view the plant as a source of revenue. Colorado, the US leading test market for legalized weed, saw more than $1.3 billion in total sales generating upwards of $200 million in tax revenues. Regarding growth, the Colorado market saw 30% increase in sales during 2016 and expects that trend to continue. Washington State is another critical test market and has had legal marijuana since 2014. Tax revenues in the first year totaled $2 million and then grew by 1500% to over $30 million in 2016.
Not only do states see a benefit from revenues there are also considerable savings related to enforcement of onerous drug laws and incarceration of criminals. Estimates vary greatly but are generally accepted that non-violent drug offenders cost US states upward of $6 billion per year.
Industry Growth Is Expected To Be Robust: How Much Will Marijuana Stocks go Up in 2018?
A report from market analyst Cowen and Co. suggest that not only will the marijuana industry result in billions of annual revenue for state and federal government it is likely to grow at a geometric pace over the next decade.
The report estimates the current legal marijuana market at roughly $7 billion with a possible $25 billion in black market sales. Assuming full legalization across the country Cowen and Co suggest that total marijuana sales could top $50 billion by 2026.
Considering that Colorado is worth more than $1.3 billion annually and the estimated number of Americans in favor of legalization is over 60% that estimate is likely low.
Along with an increase in tax revenues is an essential benefit for communities all across America; jobs. Forbes reported on a study done by New Frontier Data that legalized marijuana could create more jobs than manufacturing by 2020. According to the survey, there could be more than a quarter million cannabis related jobs within the next few years, surpassing manufacturing, government and even utilities.
New Frontier also suggests that the current legalized marijuana industry could see compound annual growth of 17% over the next decade. Medical sales are expected to grow from $4.7 billion in 2016 to over $13.3 billion in 2020. Recreational sales for adults are expected to grow to $11.2 billion from $2.6 billion in that same time. What is important to note is that these figures do not take into account new states that may adopt legalization by 2020, only those states that currently allow some form of legalized marijuana.
Any states that do legalize use will only increase the potential for growth, and there are several with initiatives in progress. The next eight most likely to legalize are Arizona, South Dakota, Vermont, Connecticut, New Jersey, Michigan, Rhode Island and North Carolina.
Medical Marijuana Use Is Still In Debate
The US Drug Enforcement Agency stands by its position that marijuana has no medicinal value but has relaxed the laws surrounding its use in research. Up until mid-2016, the University of Mississippi was the only legal grower of research quality marijuana. Now, with the doors opened to broader study, it is possible the DEA and FDA could change their views. There are currently more than 350 approved scientists working on the matter. Regarding revenue, states with medical marijuana saw sales top $2.4 billion in 2015 and doubling in 2016.
Even so, there are still barriers to medical marijuana research. Any facilities wishing to grow and perform studies will always have to be vetted through background checks, facility inspections, rigorous record keeping and further verification of their findings from the FDA. Further, if the DEA and FDA can be convinced of the efficacy of medicinal use, it would still take an act of Congress to change the classification of marijuana and make it legal on the Federal level.
The most common use of medical marijuana is for pain related issues, but they are not limited to pain alone. Cancer patients report cannabis can help subdue nausea and increase appetites which are a significant concern for patients undergoing chemo and radiation therapy. MS patients benefit from reduced inflammation, pain, spasms and even paralysis. Parkinson’s patients have also reported reduced shakiness and seizures while much other illness benefits as well.
AbbVie (ABBV) is not a pure play on marijuana, but it is deeply involved with the medical marijuana industry. It is the manufacturer of the only FDA approved a marijuana-based drug, Marinol. It is a spin-off of Abbot Labs, a world leader in pharma products, and a very safe play when compared to the general run of marijuana focused companies currently listed in the US. It recently announced a 9% increase in annual revenues and raised its full-year guidance. It also pays a dividend. Real Time Stock quotes can be found for this company by searching on google.
Medicine Man Technologies (MDCL) is a licensing and consulting services engaged with cultivators, dispensaries, distributors, and investors of marijuana. It was co-founded by the same people who started Colorado’s largest cultivator/retailer and is emerging as a leader in the field. The company is still in the early growth phase, posting a net loss of -$0.01 in the recently reported quarter, but is showing remarkable revenue growth and will benefit from expanding legalization. Revenue in the fiscal 3rd quarter was reported at $0.93 million and up more than 350% from the same period last year.
Cara Therapeutics is another reasonably safe play for would-be marijuana investors although not a pure play and not without risk. The company is engaged in finding treatments for pain and itching with at least one marijuana-based drug in the development pipeline. The company’s real claim to fame is a drug called CR845, a non-opioid pain reliever that does its work without the dangerous side effects of opioids. The company operates at a loss but has a market cap near $400 million and average daily volume greater than 650,000.
Some US Marijuana Stocks To Watch
One segment of the market that is set to grow are those manufacturing and distributing vaporizing technology. The catch here is that many of these companies are very small and likely to cave under the weight of FDA regulation. As the vape market has expanded, the FDA has taken note and begun to crack down on the devices themselves. Citing, among other things, the danger posed to humans by holding the devices so close to their faces. Finding the best marijuana stocks to invest in is the real challenge to profiting from the massive industry rise.
While the FDA is a burden to the entire industry, there are those within it positioned to survive and thrive; big tobacco. Big tobacco has been at the forefront of vapor technology as more and more Americans turn away from traditional tobacco products. Big tobacco is expected to be able to leverage their experience in the coming years as marijuana becomes more and more widely accepted. The tobacco industry is expected to dominate a full 20% of the marijuana market by 2020 with roughly 20% of their top line revenue derived from the same. This could be the way you would want to start buying stock in marijuana industry.
Another segment that bears watching is the edibles/drinkables space. Companies in this segment benefit not only from the burgeoning cannabis industry but from the fact that many of the products are created from wastes leftovers and otherwise unused and less expensive portions of the marijuana plant. Regarding growth, it is the fastest growing segment of the entire cannabis industry and the subject of much debate. Colorado reports the growth of edibles increased nearly 70% in February 2017 versus the same period a year ago but also says dosages are wildly variable.
Lexaria Biosciences (LXRP) is a company engaged in developing and distributing edible cannabis products. The company is trading OTCQB but making great strides toward growth. It has in the past year acquired some smaller operators to boost scale and product line. ILXRP is currently manufacturing and distributing a “mouth-melt” product in California, Colorado, and Canada through a joint venture with Neutrisci International (NRXCF).
CannaRoyalty (CNN) is a newer operator in the cannabis space and engaged in the investment, development, and branding of existing marijuana and marijuana-related businesses. The company operates in 3 areas to help businesses to grow and does this in exchange for royalty agreements on future sales. Revenues remain low but have shown remarkable growth since public listing, up to nearly $1 million from $0.01 million in the most recent quarter. The stock trades OTCQX with a market cap of $87 million.
Catalyst For Growth? Legalization Of Marijuana
The most significant obstacle facing legalization is the Federal Government. While they have mostly turned a blind eye toward states embracing the plant, it is still illegal on a Federal level. This puts the industry at risk for criminal actions at worst, and in an awkward position at best.
One of the many complaints coming from the industry is a lack of supporting services such as banks and financial institutions, institutions that choose to keep themselves out of harm’s way until the matter of legalization has been decided once and for all.
According to Federal law, banks are required to report any marijuana-related transactions as suspicious activity and open themselves up to seizure by the FDIC. Some smaller operators have chosen to ignore the law, but the larger institutions such as JP Morgan, Bank of America and Wells Fargo have stayed well away.
What makes the issue even more confusing is President Trump’s often conflicting opinions about marijuana. He has said on numerous occasions that he is in support of medical marijuana, it is his stance on recreational use that is of concern. He’s supposed that it could be good in some ways but wrong in others. Nonetheless, he has also said he stands behind the states right to choose for themselves. This is, of course, contrary to what Attorney General Jeff Sessions says; “good people don’t smoke marijuana,” comments that raise the specter of a new War On Drugs.
Until recently there was little he could do. The Hinchey-Rohrbacher Amendment prevented the Justice Department from taking action in or against states that have already voted to legalize marijuana, but it may be allowed to expire.
Top Marijuana Stocks to look for
Another hurdle for the growing marijuana market is a lack of standards and regulation. The industry has operated on a black market basis for decades and only recently come into mainstream acceptance. To date, that recognition has been spotty as individual states move independently to legalized weed. This leaves states working mainly on their own to develop standards, laws, and regulations to protect the industry and consumers.
The most significant issue with standardization is potency. Plants have been bred over the past 20 years to have the highest levels of THC ever seen. No two plants contain the same amount or combinations of secondary psychoactive chemicals and growing conditions play a significant role in the outcome.
What makes a dose? Which plants are best for what? In Washington State the proper dose is 10mgs, but many say that is too high as effects tend to lag and users can quickly take “too much.” Some researchers have suggested microdoses as low as 2.5mgs for edibles, pre-rolls and vaporizing.
A Colorado-based company, Ebbu LLC, got its start with the idea it could isolate the individual psychoactive compounds found in marijuana to produce a product that could deliver the same effect every time it is used.
The lack of standardization of regulation makes it hard for new companies to enter the market. In California, the laws which govern who may grow, sell and distribute are a tangled web of state, county, and local laws. Trying to cross borders is especially difficult for new business. A business may be legally operating in one state but may not meet the requirements in another, effectively preventing them from entering a market they ought not to be barred from.
Top cannabis stocks to buy
There are risks to the market, legalization notwithstanding. The $200 billion per year alcohol industry for one is fighting against cannabis. Alcohol industry supporters have contributed significantly to the fight against legalization, most notably in California and Massachusetts, two states that passed legalization last year.
On a state level, high taxes may mean black market cannabis will persist. California sees the potential for taxes as high as 45% in some areas. This is because local and municipal governments exact high excise and business taxes as they eye a new source of revenue. The state is expected to start issuing licenses for growers and distributors January 1st and will levy a 15% excise tax on sales as well as a $9.50 per ounce state cultivation fee which, along with high county and city taxes, would put legalized cannabis at a distinct disadvantage to an already well established black market.
Top marijuana Stocks 2017
There are many areas of the industry in which to invest but no matter which it is, it still takes the growers and cultivators to make it all work. Americann Inc (ACAN) is a developer of state of the art cultivation facilities for medical marijuana. It targets and develops real estate specifically for that purpose as well as investing venture capital in new and start-up marijuana business. The company has recently announced an $800,000 investment that will allow it to expand its portfolio to that effect. It is still reporting net loss while in the early development and growth phase but is showing remarkable growth. In the last report, total assets grew 55% YOY with a net decline in liabilities.
There are dozens of publicly listed marijuana and marijuana-related stocks on the market with most trading OTC. The difficulty for investors is knowing which ones are likely to stand the test of time. The bottom line, however, is this; Marijuana Stocks is big business, the legalization of marijuana is spreading across the US and expected to grow at an exponential pace over the next ten years. If you can handle the risk the potential for gains is astronomical.