Even The Big Boys Want Some Pot

When thinking of trends that have changed in the world over the past decade, technology comes to mind. The proliferation of digital devices, wireless high-speed Internet, and interconnectivity has made consumer electronics and how we use them tremendously different than just a decade ago.

This change in technology has sent the shares of the tech companies able to ride this wave to the moon. But technology isn’t the only sphere to radically transform our lives and the investment landscape.

11 Years Since First Legalization

In 2012, for the first time in U.S. history, recreational marijuana use was legalized on the state level, by Colorado and Washington. Today, recreational marijuana is legal for adults in 22 states and Washington, DC. Medical marijuana is legal in 38 states and DC (see chart).

In 2018, Canada became the first developed country to legalize marijuana nationally.

However, recreational marijuana possession, commercialization, and consumption still isn’t legal on a federal level in the U.S., so even though legal marijuana sales have grown by leaps and bounds, for the industry it’s not yet totally smooth sailing.

For instance, U.S. companies with a national presence can’t fund operations that work directly with cannabis. At this time, investing in marijuana should still be considered a speculative endeavor—with great potential upside but also high risks.

Even though there are still question marks surrounding the legal marijuana market, there is no doubt growth potential there. Even some mainstream non-marijuana corporations are trying to get a piece of the action. The key is picking the right pot-related stocks.

Corporations Foraying Into Pot

Adult beverage maker Constellation Brands (NYSE: STZ), best known for the Corona and Modelo brands, is in a partnership with Canopy Growth (NSDQ: CGC) that sells water-based drinks mixed with key marijuana ingredients THC and CBD. So far, sales have been underwhelming. Pot consumers seem to prefer solid consumables along the lines of flower (i.e., smokeable weed), gummies, and chocolates.

Constellation’s rival Anheuser-Busch (NYSE: BUD), best known for Budweiser, formed a similar partnership with Tilray (NSDQ: TLRY), but Anheuser-Busch pulled the plug last year. The generally disappointing sales figures for pot-infused beverages and the failure to legalize pot federally in the U.S. is so far giving Anheuser-Busch second thoughts.

Scotts Miracle-Gro (NYSE: SMG), known for its gardening products, has a division called Hawthorne that focuses on supplies (such as hydroponic systems and lights) that can be used by marijuana growers. Hawthorne has acquired interest in several companies related to the pot industry. Since weed is still not legal on a federal level in the U.S., there are limitations as to what the money can fund, but Scotts is putting itself in position in case the market opens more.

As one of the biggest names in the tobacco industry, it seems like a natural step for Altria (NYSE: MO) to get into marijuana. It spent $1.8 billion in 2018 to buy a stake in Cronos Group (NSDQ: CRON), another cannabis company. Altria is also one of the biggest lobbyists for cannabis legalization and regulation. It has filed for numerous patents in marijuana technology.

You Need Guidance to Tap Pot’s Potential

These investments by and large have yet to bear much fruit, highlighting the fact that although the marijuana market is huge, even big corporations with their teams of execs, analysts, and accountants, are not finding it easy to invest profitably in pot.

However, it’s clear that the marijuana industry offers a major investment opportunity for proactive investors. Due diligence is required. It’s also important to remain patient, because positive regulatory changes are coming down the pike that will make a huge difference. Do your homework before investing in marijuana.

That’s where my colleague John Persinos comes in. John is the editorial director of Investing Daily. He’s also chief investment strategist of the premium trading service, Marijuana Profit Alert.

If you want to tap the massive profits up for grabs in the trends I’ve just described, I urge you to read John’s new book: The Wide World of Weed and Psychedelics. The product of years of painstaking research, his book is now available for sale. Click here to order your copy.