Written by Christopher Nash
“Just say NO!” is what we are all advised when it comes to Marijuana. However for us return crazed investors, we know that just isn’t an option when it comes to this leaf. With some stocks of this new industry trading in the OTC markets (“The Dollar Tree” for stocks) for as little as $0.0023, the possibility to make $$$$ is tremendous and hard to say no to. Nonetheless we can’t just call our dealer and order up a large investment of shares in any one of these companies without having an idea of what sets these prices where they are and why they have the potential to soar.
When many of these stocks first came on to the market we saw $1.00 stocks go to over $80 in just a few months. Talk about a legal high! Imagine investing $1,000 at this time and congrats it’s now worth $80,000! Nevertheless not long after, almost all options plummeted down to….oh around $0.17 cents we’ll say. From $1,000 to $80,000 to $170. Play the market right at times like this you might be reading this in your Malibu mansion. Got greedy? You’re flipping burgers at McDonalds. Important lessons can be learned in regards to taking gains when an investment makes you money and understanding how and why things can change in the market. Well long story short, this whole season of gains for the green stocks was all due to hype. Everyone believed that this was the next big thing to come and where to throw their money. They were not wrong, just a little too early.
Recreational Marijuana is currently legal in 4 states; whereas “Medical” marijuana is currently legal in 7 more. That translates to 22% of this nation’s states in the growing business. As you can these companies don’t have a large enough operating area yet. I feel confident that all of us can agree, whether we feel giddy at the thought or fear of it to come, eventually marijuana will be legal across the entire United States, as well as Canada. No time frame can be given for this, although I would predict only another 10-15 years till it is common place. Lets face it, the USA would benefit financially by the income received on taxes of this commodity. Should said laws be changed, companies involved with recreational marijuana will have the access and capability to expand their niche to a larger share of North America. This is great news for investors looking to get in early and stay for the long haul! With operations opening all over, expected revenue growth should be exponential for at least a few years with the growth of these companies. We should continue to see steady growth from there on out.
My favorite stock: American Green (TICKER $ERBB) is a company that deals with direct distribution of both medical and recreational marijuana. They largely employ their own custom designed vending machines to sell their products with ID verification software with the ability to validate which clients they sell to. With a flat lined share price of around $0.0022 this stock simply can’t go any lower. It is due to their competitive new products and technologies that set them apart from the others and positions their company for future success in the years to come. Once the market for these products becomes more accessible to a larger population this stock could effortlessly rise to at least $2 per share with the possibility of going even higher. This change can be backed by their predicted revenue increase and the EPS it will bring once the market trend gets going once again. With the stock so inexpensive right now, a $20 initial investment could potentially lead to a gain of $16,000 at the top of the uptrend (assuming a share price of $2, when the stock has the potential to go much higher). Frightened investors unnerved by the controversy surrounding the industry as Marijuana is still illegal at the federal level has led to stable instability.
Nevertheless this stock has immense possibilities to produce extraordinary gains. Observing from another angle are the biotech’s that deal with the use of marijuana and its medicinal purposes in their new drugs. These companies such as GW Pharmaceuticals (TICKER $GWPH), and Cara Therapeutics (TICKER $CARA), operate much more like pharmacy companies both in how the stock fluctuates and their market caps.
However there is one factor to these enterprises that will always keep me out of investing. They are still in the testing stages for these new drugs!!! Not one of these companies have yet to produce and actually SELL any of the big name drugs that they so constantly advertise. Their market caps are high considering the fact that these companies themselves produce very little revenue and have yet to show any growth without the success of their drugs. This is a warning sign, as it shows risk beyond what I am personally comfortable with. Biochemistry is a complex and ever changing field of study in which these names operate and failure is almost always eminent before success. After all, we learn from our mistakes. With no promise to deliver on any of these miracle drugs, I cannot with good conscience give them my hard earned money when facing the fact that I may never see it again. For those who are more optimistic and willing to take the risk, the market is open for you to buy in. However in my opinion I would advise against this due to the uncertainty of future gains.
Soon Marijuana could really give you a bang for your buck! Not just to the consumers of the leaf but to your money in unison as it undergoes 10 fold changes or beyond. The market is still inexpensive enough that great bargains are available to hold our positions until the market sky’s for these investments.
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