These
are heady times for supporters of legalized marijuana as well as those looking
to cash in on pot's growing national acceptance. This month, voters in
Washington state and Colorado agreed to legalize the recreational use of
marijuana for adults. And medical marijuana is currently legal in 18 states and
Washington D.C.
Of course, marijuana remains illegal by federal law. But people involved in
what some are calling the "green rush" are still looking at business and
investment opportunities in cannabis and its production.
And as with nearly all markets, some people are willing to take the risk.
"Think of it as another dot.com explosion," said
Bruce Perlowin, CEO of
Hemp Inc. (
HEMP
-1.61%), in a recent
press
release.
And according to an
investor
fact sheet for
Medical Marijuana Inc. (
MJNA
-0.85%), the current U.S. medical marijuana industry is estimated at $17
billion, with expectations it could grow up to about $29 billion by 2016.
"It was almost unthinkable 10 years ago that you
would have legitimate, fully reporting to the SEC companies that were in the
nature of pure plays, with positions in the medical marijuana industry," says
Sterling Scott, CEO of Los Angeles-based
GrowLife Inc. (
PHOT
-9.52%), a consortium of companies that sells products for indoor growing.
Scott, a former federal regulatory attorney, estimates there are about 10
cannabis-related companies currently being traded as over-the-counter stocks.
Most OTCs are relatively small and often new companies that don't yet meet the
requirements to be listed or traded on exchanges like Nasdaq or the New York
Stock Exchange.
He breaks down these marijuana sector firms into four groups:
- Established companies, like GrowLife, that sell equipment and expendables
for the cannabis industry.
- Companies like Medical Marijuana, whose mission,
according to its website, is to become the
industry's "premier cannabis and hemp industry innovators."
- Groups like Hemp Inc. that are looking to develop a legal market for the
industrial and commercial use of hemp (which contains only trace amounts of
marijuana's active ingredient) in products such as paper, oils and cloth.
- Companies focused on the clinical, medical use of cannabis in areas such as
cancer, inflammation and pain treatment.
"The safest position during the Gold Rush in California in the 1800s was to
sell (miners) the equipment they needed to go out and explore for gold,"
explains Scott. "Our company has taken a fairly conservative position, as to the
kind of things that we can engage in, because of the federal law position. And
we intend, until there's a great deal more clarity on the federal side, to
continue to be fairly conservative. But that's not true of all these
companies."
So are these small stocks worth an investor's time? It depends on how the
future plays out for the sector.
"If the new marijuana laws in Colorado and Washington… are a sign of things
to come, if you're a firm that can benefit by this industry being created into a
legal and viable industry, then if you can get in early enough, then those
stocks may go up in value," says Mac Clouse, professor of finance at the
University of Denver's Daniels College of Business.