How to Maximize Your Potential in Cannabis Stocks

As many of you may know, on October 1, 2014 — less than one week ago — Maryland joined the list of states, now 23 strong, that have legalized or decriminalized cannabis.

I’m not going to bore you with the specifics of the law, but the big takeaway here is that now, officially, a first-time offender caught with less than 10 grams of marijuana will be subject to a $100 fine as opposed to arrest.

How exactly police will determine what is 10 grams or less is still up in the air, as are a number of other legal and procedural ambiguities, but the common — and certainly oversimplified — perception of the situation is already gelling…

Weed’s finally legal, and it’s here to stay.

I don’t need to do extensive market research to see that as far as the public is concerned, the paradigm has shifted.

Last Thursday — the day after the law took effect — I was sitting at a red light beside a high school in Bethesda and watched as a pack of teenagers passed around a single handheld vaporizer in plain view of anybody who cared enough to look.

How did I know they were consuming something more nefarious than the commonly available flavored oil you see people inhaling so much these days?

Because more than half of them were also smoking cigarettes while the vaporizer circulated.

If it weren’t for the modern technology, the whole ritual would closely resemble scenes most of us can either remember or directly relate to from our own younger days.

And aside from a couple glances over their shoulders, these kids appeared not even slightly concerned with getting caught.

The next day, as I was pulling out of our office parking garage right in the middle of Baltimore’s bustling Inner Harbor, I drove past a trio of grown men passing around what was unmistakably an old-fashioned joint.

Again, it was in plain view, and again, nobody cared.

These stories go on. You might even have some of your own.

Overnight, what’s been illegal as long as any of us can remember is now such a trifling criminal speed bump that it might as well not be there at all.

A Play for Every Pattern

Now, while public pot smoking may still be not the wisest thing to do — as it will still be a while before we get a realistic concept of how law enforcement is going to respond to the new variable on a practical, street-level basis — the fact that marijuana and marijuana-related products are now closer to mainstream than ever is undeniable.

And as the stigma continues to decrease with any and all things cannabis related, the revenue streams made possible by exploiting one of the most diversely useful plants known to man will start to gain steam.

So as people who can see a major legislation-, culture-, and industry-driven trend coming, how do we get involved?

Well, for those interested in safe investments, there are always companies like Lindsay Corporation (NYSE: LNN) — which makes, among many other things, irrigation systems — and Potash Corp. (NYSE: POT) (don’t let the ticker symbol fool you) — which makes various fertilizers.

To those with a little bit more adventure in their blood, however, there is an entire legion of small cannabis and cannabis-tech stocks out there that will either thrive or perish, depending on the legislative trajectory of marijuana in the United States.

Cannabis-Driven Biotech

Since Maryland was the most recent state to join the decriminalization parade, my favorite marijuana-related stock of the moment is Silver Spring, Maryland-based Nuvilex, Inc. (OTC: NVLX).

But don’t think this stock is all about bongs, vaporizers, and the freedom to get high in public without threat of oppression by the Man.

Rather, Nuvilex, Inc. is a biotechnology company that develops treatments for pancreatic cancer, breast cancer, brain cancer, and diabetes through cellulose-based live cell encapsulation technology.

To date, it’s completed two Phase I/II clinical trials in inoperable pancreatic cancer, as well as research studies in diabetes cell therapy.

Its involvement with the cannabis industry comes through its subsidiary, Medical Marijuana Sciences, Inc.

The main focus at Medical Marijuana Sciences is on the use of live cell encapsulation technology in optimizing the cancer-treatment effectiveness of cannabinoids.

So cannabis is a cornerstone of this company’s research… but does this qualify Nuvilex as a true cannabis investment?

Well, based on the way the stock has been performing, yes. If you go through most of the sub-$200 million market cap cannabis plays, you’ll see an interesting pattern emerging in their yearly stock charts…

Sector-Specific Market Cycle

Between February and March, most of them rose dramatically, hitting their 52-week highs before tapering back down towards the last quarter of the year.

Vaporin, Inc. (OTC: VAPOD), Medical Marijuana, Inc. (OTC: MJNA), Cannabis Science, Inc. (OTC: CBIS), and Terra Tech Corp. (OTC: TRTC), which collectively do everything from marketing vaporizer pens to designing hydroponic equipment, all traded between 200% and 500% of their current share prices back in early spring.

Nuvilex, with its seemingly tangential involvement in the industry, exhibited a similar pattern, trading at about 2.5 times its current price back in March.

It’s pulled back since then, but not as much — indicating some level of stability in an otherwise volatile sector.

So even though Nuvilex is clearly a biotech company, the cannabis angle is evidently playing a role in the marketability of its stock.

Put more succinctly, if the market sees this as a marijuana stock, so it shall be treated.

At $0.18, however, this is still a $127 million company — making it fundamentally better anchored than some of the $30 and $40 million firms riding the coattails of the same trend.

Don’t Be a Hater

Now, to those of you who are eternally skeptical of anything related to this plant, rest assured that I’m right there with you.

When something has as much cultural appeal and societal stigma as this, it’s hard not to get caught in one camp or the other.

The fact is, regardless of whether you think that smoking pot is every person’s natural right or that the plant is a gateway drug and best left out of the reach of casual users, cannabis has been excluded from the scientific process for largely unfounded, trumped-up reasons.

Reasons that have little to do with science and everything to do with politics.

Today, as the laws are finally making it easier to research the true benefits of this natural substance, a growing number of young companies are leading the way to make up for decades of lost time.

Don’t let prejudice (or paranoia) turn you away.

Fortune favors the bold,

Alex Koyfman