The Two Worlds of Cannabis Investing
I don't care about your morals or your politics, because when it comes to economic trends rooted in social evolution, this is about as real and dramatic as it gets.
Cannabis is here to stay, and you have two choices: either kick and scream and pray to Jesus (or Muhammad or Gaia or whomever) that all of the legislative progress made in the name of decriminalization over the last decade is magically reversed, or accept that this social movement is now a viable and rapidly expanding industry, and learn to benefit from it.
In all my years of investing, I've seen this level of interest stemming from a single sector maybe once: during the dot-com boom.
The internet, which also started out (and continues to be) rooted in social evolution, ended up becoming the most important step in global economic development in the last century, if not ever.
And while marijuana may not be technologically versatile enough to have as widespread a financial impact, it has nevertheless gained enough momentum that thousands of analysts and tens of thousands of investors have gone all in.
Having seen the possibilities of the key molecule that makes cannabis the magical plant that it is (tetrahydrocannabinol, or THC), I'm as big a believer as any that we may be on the cusp of some amazing opportunities and advancements.
Hold Your Horses, Champ
That said, this isn't a class of investment I would recommend anybody step into with a blindly optimistic attitude, as there are hazards.
The main issue I've found is that casual investors are largely incapable of distinguishing between the two basic types of cannabis companies.
The difference is pretty stark, and yet, because of the current mania gripping the financial community, many, even some of the professionals, remain blind to the most important aspect.
It really can't get any simpler... There are the "fun" cannabis companies and there are the "serious" cannabis companies.
The fun type is characterized by products and services marketed towards individuals who view cannabis as a recreational substance... whereas the serious kind are the companies developing products for the biopharmaceutical industry.
More succinctly, there's stuff you eat, inhale, or drink to feel good, and there's stuff you take to make you less sick — or even to save your life.
That's it, in a nutshell. The problem, once again, is that sometimes it's hard to see through the marketing hype and understand what they're really doing.
And since the entire sector, serious and fun alike, is currently in a boom phase, the argument for why one is better than the other loses strength.
Don't Mess Around With Companies That Mess Around
If you look at the largest public cannabis companies operating right now, you'll see that they all have one thing in common — and it's not products designed to get you high in any way, shape, or form.
Companies like Aurora Cannabis (OTC: ACBFF), which currently trades at $1.80 for a market cap greater than $600 million; Axim Biotech (OTC: AXIM), which trades for $10 a share at over $500 million market cap; and Corbus Pharmaceuticals (NASDAQ: CRBP), which is valued today at about $300 million, as well as a host of others, can credit their success not to potheads but to Big Pharma.
All of the companies are involved in cannabis production and research for the purpose of developing new medicines and therapies — with growth catalysts coming from confirmed scientific viability finally unhindered by universal prohibition.
Yes, there are dozens, perhaps hundreds of companies out there, both public and private, that are growing weed to sell through retail outlets or for use in such things as clothing, but nothing compares to the world-changing possibilities of cannabis as a basis for future medical breakthroughs.
Don't get me wrong; when it comes to making profitable investments, I don't discriminate based on how much good it will do for mankind.
I'd rather make a million dollars selling legal weed to stoners in California than one-tenth that developing a cure for Parkinson's.
I wouldn't like it, necessarily, but our goal is profit, not philanthropy.
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How I Learned to Stop Worrying and Love the Weed
Luckily, the way the cannabis industry is itself evolving into its various niches, this is a decision none of us have to make.
The most lucrative investments driven by the rapid pace of decriminalization are in the medical field — period.
These aren't just investments that will return eye-popping gains in short order, as the three above have in the last 12–15 months (they're up 300%, 650%, and 410%, respectively), but investments that will continue to return year after year, until they're either bought out or grow into multibillion-dollar pharmaceutical firms in their own right.
Compared to that, the rest is just a flash in the pan, or, as the case may be here, in the pipe.
Right now, I'm following a company that I think is on pace to become one of the biggest yet, and to no surprise, its business is biopharmacology — the "serious" side of this industry.
The stock is compelling for a number of reasons: It just IPO'd a few months back, meaning it's fresh, tightly traded, and still quiet, as the story hasn't made its rounds just yet.
It trades on the Nasdaq, one of very few cannabis companies that have managed to do so.
It trades at a market capitalization well under $50 million, making it one of the tiniest, and therefore one of the most prospective, Nasdaq-listed companies.
But here's the kicker, and it has nothing to do with stock metrics.
This company is developing a product that sidesteps all remaining prohibitive legislation. It's not a loophole. It's not a legal trick that the regulators are licking their teeth thinking of a way to shut.
The Next Step: Get Rid of the Middleman
This company is getting past what legal hurdles remain in the path of this highly controversial molecule by producing it synthetically.
You read that right. Its THC, while indistinguishable to your body, is synthesized artificially.
So while cannabis reform of any kind has yet to arrive in 21 states, medical research and even product development using this artificially produced THC is possible.
But this company isn't just producing the molecule for others to work with. It's working on solutions to a number of illnesses, focused primarily on the neurological realm.
Diseases like Tourette syndrome, Alzheimer's, and Parkinson's are in the crosshairs, with huge target markets behind each of them just waiting on a much-needed remedy.
Underscoring the importance of this research, Alzheimer's alone is estimated to cost over $200 billion a year just in the United States.
With an aging population to contend with, most developed nations are facing a similar deluge of new patients and added expenses.
Across the entire pharmaceutical industry, few proposed solutions have shown as much promise as THC... and no molecule has shown to be as versatile as THC in addressing other concerns.
And yes, this is a company whose stock you can buy today for a pittance compared to where it could be in just 12 short months... or less.
Like I said, this company just went public earlier this spring, so it's about as fresh as they come — which is why I made it a mission to be first in covering it.
I've recently finished a report, "Synthetic Marijuana: The 100% Legal Future of Big Pharma," which details this company down to the award-winning scientific team behind the breakthroughs.
For instant access, click here, watch the quick video, and access your report right now.
If you're prone to hesitation — and trust me, I am — just take another look at those gains the previous companies I mentioned saw in the last year.
Fortune favors the bold,
Coming to us from an already impressive career as an independent trader and private investor, Alex's specialty is in the often misunderstood but highly profitable development-stage microcap sector. Focusing on young, aggressive, innovative biotech and technology firms from the U.S. and Canada, Alex has built a track record most Wall Street hedge funders would envy. Alex contributes his thoughts and insights regularly to Wealth Daily. To learn more about Alex, click here.
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