Have you been following the trends in marijuana stocks? It’s been a wild ride, dude…
A new frontier of profits has opened up courtesy of the widespread legalization of both medicinal and recreational marijuana. Colorado and Washington now allow the sale of recreational marijuana, and 20 others allow it for medical purposes. Many more will follow in the coming years.
Now a whole lot of people are getting rich…quickly.
Just take a look at some of the gains:
- 1910% on CannaVest, who had a 52-week low of $10 and a 52-week high of $201 a share.
- Next Gen Metals’ stock rocketed from five cents to more than 70 cents after they announced plans to invest in marijuana companies. That’s an insane 1,300% gain.
- Hemp Inc. went from a penny to 34 cents a share, a 3300% gain.
Unfortunately, at this point, it’s mostly smoke and mirrors…
Now, the market for marijuana stocks will certainly have some long term winners that will make plenty of people rich. But plenty of others will get burned in the meantime.
It’s no secret that legalized marijuana will eventually be a massive industry. It already has a built-in market that has been paying artificially-inflated prices due to the illegal nature of the habit.
It’s actually one of the fastest-growing markets in the country. Sales of legal marijuana should top $3 billion by the end of 2014. That is more than double what it was the year before.
And it won’t be slowing down anytime soon… Medical Marijuana Business Daily predicts total sales could quadruple to $6 billion by 2018. All told, the entire market could get higher than $10 billion by 2018.
That’s because America seems to be embracing it with open arms…
A recent survey revealed that 7.3% of Americans 12 or older regularly used marijuana in 2012, up from 7% in 2011. That’s 7.6 million Americans that light up almost every single day of their lives. Countless millions of others use it occasionally…
Even non-smokers have come around to support legalization. A recent Gallup poll showed 58% of Americans support total legalization. The percentage soars to 72% approval when those under 30 are asked.
And that number doesn’t include the large infrastructure and auxiliary products needed to support such a massive industry.
But right now, there are some companies using tactics dirtier than Tommy Chong’s bongwater…
CannaVest (OTC: CANV), is perhaps the biggest “success” story in the legal pot arena. According to CEO Michael Mona Jr., their “sole focus is to source and supply the highest-quality industrial hemp available on the market.”
Here’s the chart on the way up:
That is an incredible 1400% gain. But, now check out the immediate aftermath:
To quote reggae legend Jimmy Cliff: “The harder they come, the harder they fall…”
This roller coaster ride is pretty typical of the pot stocks right now. When CannaVest hit $160 a share in February, it was valued at an unbelievable $3 billion. Even CannaVest’s largest shareholder Bart MacKay knows that the stock is blowing around like a smoke ring in the wind. He admitted to Forbes that the stock would totally crash if he sold off a large chunk of his holdings.
“In my view it’s a paper valuation and certainly not something I can take to the bank,” he told Forbes.
This wild fluctuation has raised more than eyebrows. It’s raising serious capital for any companies that jump into the weed business, in any shape or form. Companies are literally adding ‘marijuana’ to their names in order to cash in on the latest investment craze. Over 60 publicly traded companies have sprung up with some tenuous connection to marijuana…
Case in point, the new “marijuana” company Integrated Cannabis Solutions Inc. They have just registered to change their name from — get this — Integrated Parking Solutions. Once they did, they began paid promotion of the stock on the OTC exchanges.
Here’s what happened:
That’s a quick 639%.
I’m willing to bet a king’s ransom that Integrated Parking Solutions would not have been able to pull off a massive gain like that if they just focused on parking. Just look at its Q1 filings:
Cash: $0
Current assets: $0
Total liabilities: $33,989
Revenues: $0
Net loss: $300
This is what you want to avoid.
Integrated Cannabis Solutions Inc. basically slapped a green coat of paint over its existing business. This isn’t always a bad thing, but I am far more interested in companies that have been cultivating (pun intended) a marijuana business for a while, not some Johnny-come-lately trying to shift its business on the fly.
Let’s take a look at a company that has a legitimate shot at raking in the green…
GW Pharmaceuticals (NASDAQ: GWPH)
GW Pharmaceuticals is a UK-based company that has the fundamentals to prosper as medical marijuana becomes more and more accepted. It specializes in the research, development, and commercialization of a range of cannabinoid prescription medicines.
Its main product is Sativex, a spray that helps treat Multiple Scleroses symptoms, cancer pain, and neuropathic pain. Upcoming products will target epilepsy, schizophrenia, and diabetes.
Its epilepsy drug Epidiolex could be a huge seller if approved. Epilepsy affects over 50 million people globally and current drug therapies are not effective in 30% of epilepsy patients.
Marijuana-derived medications for epilepsy got some media attention recently when Paula Joana confronted Governor Chris Christie at a town hall meeting. Sabina, her 15-month-old daughter, died from an epileptic seizure caused by her Dravet syndrome. She chided Christie for holding up medical marijuana in New Jersey, shouting that her daughter would still be alive if the marijuana-derived medicines had been legal.
Epidiolex targets Dravet syndrome…
The company itself got some high profile media coverage when CNN’s Dr. Sanjay Gupta visited its labs for his popular broadcast Weed. Management gave him an exclusive look at their operations. You can watch the video here.
And, unlike some of the fly-by-night pot stocks, these guys actually make money…
- Their most recent financial report shows revenues of $12.4 million
- They currently have around $55 million in cash
This helps explain GW Pharmaceutical’s billion dollar market cap while the bulk of the other marijuana stocks are relegated to the OTC markets.
Most telling is that it has partnered with pharmaceutical giants Novartis and Bayer to help tap into the U.S. market as marijuana policies become more relaxed. When the U.S. market opens its doors for marijuana-derived medications, GW Pharmaceuticals will be primed for a healthy payday.
Now, this isn’t to say that GW Pharmaceuticals is a low-risk play: it spots a 52 week range of 8.46 — 86.45, so we’re not exactly talking about a solid blue chip here.
It currently has plans to gain FDA approval to sell its marijuana-derived medications in the U.S. and much of its success hinges on that approval.
But it has all the fundamentals to become a budding company in the marijuana space, something that the penny stock scams have no chance of doing. Personally, I’d rather give my money a chance to grow than just watch it all go up in smoke…
