Profiting from Medical Marijuana Stocks

With guns drawn and tensions high, federal agents descended upon the private farm with the force of a small army.

Onlookers stared in horror, and the parents of an 18-month-old boy wept.

It almost looked like a scene from a gangster movie where drug kingpins and hooded assassins had to flee from justice. But in this reality, there were no gangsters, and certainly no justice — just a few local farmers and some customers waiting to buy the medicine that keeps their children alive.

It all went down in California in 2014, when drug enforcement agents destroyed a few hundred marijuana plants that were grown specifically to treat children with debilitating seizure disorders.

The result?

The father of an 18-month-old boy, who suffered from an illness that causes as many as 100 seizures per day, had to figure out how to keep his son from suffering in the absence of the medicine the agents destroyed.

Thank Charlotte

You see, there are certain strains of medical marijuana that have proved successful in treating children with extreme forms of epilepsy. Perhaps you’re familiar with a strain called Charlotte’s Web.

Charlotte’s Web was named after a young girl named Charlotte Figi who had an extreme form of epilepsy. By the time she was three, she was having about 300 seizures a week. And that was with treatment.

Frustrated, Charlotte’s parents looked into getting hold of a special kind of medical marijuana that another child with this form of epilepsy was also using.

Charlotte began taking the medication, and almost immediately, her symptoms improved. Today, she has about four seizures per month. The good folks who developed the strain she takes today named the strain Charlotte’s Web.

In any event, there has been a significant amount of evidence to suggest that certain strains of medical marijuana can be successful in treating some forms of childhood epilepsy. So needless to say, when agents raided that farm in California back in 2014 and left a young, sick child stranded, folks were up in arms.

How could such a thing happen?

After all, these agents didn’t just kill some plants. They killed patients’ abilities to get better.

Sickening

The bottom line is that despite the fact that 23 states now maintain medical marijuana is legal, on the federal level, it’s still considered a schedule 1 substance. This means it’s illegal for any person to manufacture, distribute, dispense, or possess marijuana.

While most folks would likely agree that marijuana should not be a schedule 1 substance — like heroin or the date rape drug GHB — it still is. And for individual states that have decided to embrace states’ rights and respond to the desires and demands of its citizens, this has long been an issue.

And of course, every now and then the feds will flex their muscles and raid a small grow operation or dispensary, just to remind everyone who’s boss.

It’s sickening.

But there is some good news ahead in 2016.

In fact, some have suggested that this good news indicates that the Fed has quietly taken the first step in legalizing marijuana.

Get a Piece of this Action

Right before Christmas, the DEA quietly released the following press release:

The United States Drug Enforcement Administration (DEA) recently eased some of the regulatory requirements imposed by the Controlled Substances Act for those who are conducting FDA-approved clinical trials on cannabidiol (CBD), an extract of the marijuana plant. These modifications will streamline the research process regarding CBD’s possible medicinal value and help foster ongoing scientific studies. The DEA notified affected researchers by letter of the changes, which take effect immediately.

While the Fed can still technically interfere with legal growing operations (although the DEA will no longer get funding for such activities), it has decided to distance itself from medical marijuana clinical trials.

Now, why does that matter to you as an investor?

Because there are a number of public companies that are currently conducting FDA-approved clinical trails on CBD. One in particular is GW Pharmaceuticals (NASDAQ: GWPH), which is actually the furthest along right now in terms of getting FDA approval for medical marijuana therapies related to epilepsy.

It’s also worth noting that in 2015, GW increased its production by 20 times, and now it’s expected to double that production capacity in 2016 to meet “significant commercial demand.”

While nothing is guaranteed until the FDA signs off, this looks promising. And for investors that don’t mind taking on a little risk with a company producing a drug that’s waiting for FDA approval, now is an excellent buying opportunity.

The stock is sitting at record lows, currently trading around $67. But the consensus price target is $139 a share, with both Piper Jaffray and Morgan Stanley extremely bullish.

Of course, if you like the legal marijuana space but prefer a little less risk, check out this report that’ll help you get in on some less-risky legal marijuana stocks while still making a boatload of cash.

To a new way of life and a new generation of wealth…

Jeff Siegel

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Jeff is the founder and managing editor of Green Chip Stocks. For more on Jeff, go to his editor’s page.