There's no doubt about it...
In 2017, investors made an absolute fortune in pot stocks.
But had you told me 10 years ago that the fastest-growing market in North America would be legal marijuana, I would've guessed you were high.
After all, in 2005, prohibition had been in effect for nearly 70 years, and there was no indication that there would be any support by lawmakers for such a thing. But then something very exciting happened...
A few very smart politicians realized they could make a lot of money for their districts through the taxation of marijuana. Sure, conservatives wouldn't like it, but the overriding mentality of lawmakers has always been: “Cash rules everything around me.”
And so it began...
Why States Suddenly Love Pot
In the U.S., Colorado is the best example of marijuana legalization. Its state government has seen substantial increases in tax collections due in large part to excise taxes on marijuana.
With Colorado breaching $100 million in monthly marijuana sales, politicians in state legislatures around the country are licking their chops for more money. And many of them will end up going along with legalization just for that.
In terms of taxation and use of resources, we must also consider how legalization means fewer resources will be required for putting people in front of courts and to holding them in prison. When you don’t arrest sellers and users of marijuana, it means government spending can be reduced or resources can be diverted to something else — hopefully something involving actual criminals.
Many areas already have severe overcrowding in jails and a backup of cases in court. Legalizing marijuana would only help this situation...
Hemp and Other Uses
When we talk about the economics of legalization, we really need to focus on everything. Marijuana use alone isn't the only result of legalizing cannabis.
Hemp is a product derived from the same plant species as marijuana. In the U.S., hemp production is essentially illegal under federal law — even though hemp contains little THC, which is the chemical in marijuana that gets people high. This just shows the ridiculousness of the laws. This is cronyism and has nothing to do with protecting people. It limits our economic freedom.
When you consider all the products that we're being deprived of, it's easy to understand the economic benefits of legal cannabis, particularly with hemp. This is also one of those things where it's very difficult to measure. Looking at GDP statistics won't help us.
Just take smartphones as a simple example. When someone buys a smartphone, it will get reflected in GDP statistics. But this is mostly meaningless because it isn't telling us how much happiness people are deriving from the product.
If smartphones didn’t exist, we wouldn't know what people would've used that extra money for. But smartphones do exist now, and the majority of people have decided it's worth their money to have one. For this reason, we're generally much better off for having this product available.
The same would go for hemp and all of its uses. Think of all the choices in clothes, paper products, fuel, rope, and so many other products that we could be missing out on. We don’t really know everything that's possible until it's fully legalized and the marketplace figures it out.
Like with any product, when you lift restrictions and allow free people to have more choices, it improves living standards. And when it comes to economics, free choice and living standards are really what matter the most. GDP statistics aren't what make you happy...
Even medical marijuana has a major economic impact. Just like with the use of hemp, more choices and freedom means a higher quality of life. This is actually an economic benefit.
Of course, if medical marijuana helps someone live longer or have a higher quality of life by feeling better, how can you get a bigger economic impact than this?
The other major factor we have to consider with medical marijuana is its impact on traditional medicine. What if more people try marijuana for medicinal uses such as treating diseases like cancer? What if people find success in using marijuana as a replacement for expensive drugs?
Some medical providers and pharmaceutical companies might not like this very much. In fact, they may find it in their own interest to argue against medical marijuana.
Now, it's true that some in the medical industry could be hurt by success stories in the use of medical marijuana. But we have to make sure that we use good economics in our analysis.
The overall economic impact is positive if people find that marijuana is cheaper and more effective than traditional drugs. It may hurt the bottom line of some major drug companies, but it will also help the bottom line of many individuals struggling with health issues.
Again, if people are making a voluntary choice to use a product, it's because they deem themselves better off from it. They are willing to trade their money for the product...
What Comes Next?
Today, 26 states plus the District of Columbia have some sort of marijuana legalization in place.
Next year, it will be more than 30.
Outside of the U.S., Canada is on the cusp of legalizing marijuana throughout the entire country.
Mexico recently legalized medical marijuana, and we're starting to see more and more progress in South America, where cannabis is completely legal in Uruguay and is decriminalized in Ecuador, Peru, Bolivia, Chile, Argentina, Colombia, and Brazil.
And this is all happening at light speed!
Just look at this map of North America. Highlighted are all the states and countries where marijuana is legal or decriminalized.
Considering what that map shows, it's not surprising that so many folks are looking for a way to profit from this burgeoning industry.
Certainly, we've been at it for some time now, doubling our money on a few of these stocks just over the past six months.
Make no mistake; the legal marijuana market is booming. But that doesn't mean all marijuana stocks are going to make you rich.
Moving Onward, Moving Upward
A few years ago, roughly 90% of all legal marijuana stocks were dogs, scams, and fly-by-night operations.
There was a huge run, then a huge crash. What remained was a handful of companies that were actually legitimate.
It's unfortunate that it had to go down this way, but it's really no different than any other new, exciting market.
That being said, a sizable portion of the marijuana space has been cleared of the empty shells and laggards.
What remains is a market that's a bit more credible than it was just three years ago, a market that's being embraced by a growing number of state, regional, and national governments.
Of course, the question is, which are the best marijuana stocks to own in 2018?
The Marijuana Industry's Best Friend
There are three things I want in a legal marijuana stock.
First, exposure to Canada.
Marijuana will soon be legal throughout the entire country of Canada. Those companies that are already operational in the medical marijuana space and are actively generating revenue in Canada are key targets.
Second, exposure to the edibles market.
Last year, in Colorado alone, consumers bought more than 6 million marijuana-infused edibles and concentrate products.
Early last year, a small specialty edibles company quickly closed a $4 million round of financing.
Would you have ever imagined a company making pot-infused candy bars would be able to close a $4 million round of financing?
The truth is, many doctors prefer their patients ingest medical marijuana instead of smoking it, as there are still adverse effects from smoking. It's not good for the lungs!
As well, newcomers to the legal marijuana industry tend to be non-smokers. Cookies, candy, brownies, and oils offer consumers something that's a bit cleaner, a bit safer, and allows folks to avoid the negative stereotype of a pot smoker.
Edibles are definitely going to be huge.
And finally, there's the pharmaceutical angle.
Creating marijuana-based therapies is going to be big business. I'm talking on the level of Viagra and Tamiflu.
Marijuana has been used for centuries to treat all kinds of illnesses and diseases. But now that prohibition is on its way out, the pharmaceutical industry knows it must dip its beak in the waters of cannabis therapies.
From arthritis and epilepsy to PTSD and anxiety, marijuana continues to provide relief for millions of people. As the erosion of marijuana prohibition continues, more and more folks will have access to these therapies and, of course, demand them.
Consumer behavior, my friend. It's the legal marijuana industry's best friend!
Don't Sit This One Out
Now, there are actually a number of legal marijuana stocks that fall into these categories. And of course, some are riskier than others. So when looking into these companies, be sure to do your due diligence so you know exactly what you're getting into.
While we won't be taking a look at all of our top marijuana stocks today, here are a few we've recently decided to put on the watch list for 2018:
- Liberty Health Sciences (OTC: LHSIF)
- Aphria, Inc. (TSX: APH)
- MariMed (OTC: MRMD)
- Emblem (TSX: EMC)
- Innovative Industrial Properties (NYSE: IIPR)
2018 is definitely going to be an exciting year in the legal marijuana space.
The bottom line is that we're about to witness the end of marijuana prohibition in North America. At this point, only a fool would ignore this opportunity to make a boatload of cash.
Don't sit this one out.
Before we part, we'd like to extend a sincere thank-you for joining us here at Wealth Daily. We look forward to providing you with valuable investment research and commentary over the course of your subscription. Our core philosophy is that the more you know, the better you'll be able to take advantage of that knowledge and expand your wealth. We'll continue to share our insights on how you can boost your portfolio with flexible and safe investments that will help you break free of the traditional trading advantages, traps, and pitfalls financial institutions use to siphon off your wealth.
Wealth Daily Research Team