It’s a rare event when a brand new industry sprouts to life right before everyone’s eyes, but that is exactly what’s happening with marijuana. Colorado and Washington state voters took to the ballots to usher in a new age in drug reform, and for one of those states at least, the results have been astounding. The rest of the United States is still coming to terms with how they want to deal with the new widespread support for marijuana decriminalization, and there are plenty of ballot initiatives in the works in state legislatures across the country.
As the stigma surrounding cannabis has quickly receded and support for legalization has climbed to an all-time high, the opportunity for entrepreneurs to jump in the game has never been better. Think of it as a type of gold rush, with a number of different opportunities now available to those who are willing to take some risk. Of course, with any kind of new business opportunity comes the opportunity for investors to inject some fresh capital into the blossoming market.
Legalization thus far has led to two different outcomes in Washington and Colorado. The initiative passed by Washington state voters placed the task of regulation and setting up a legal market in the hands of the state’s Liquor Control Board, which has thus far done very little to get things moving. It is expected that the state’s first non-medical marijuana shop will open in Spokane by the beginning of July. The state’s inaction has yet to land it anything at all in tax revenues, while most people have continued to use the black market or medical cannabis dispensaries to secure product.
In Colorado, the state’s legalization efforts have proven to be a huge success, collecting more than $20 million in tax revenues as of May, according to the Huffington Post. The initiative passed in Colorado differed in a number of key ways from Washington’s, allowing a more free and unregulated to market to emerge on its own. The results speak for themselves, and as the revenue figures start to pile in, investors across the country are taking notice.
There are already several options for those interested in investing in cannabis on the market. Companies like Advanced Cannabis Solutions, Aventura Equities and Citadel EFT Inc. have all had their trading suspended by the Securities and Exchanges Commission, but it’s hard to imagine those suspensions will last forever. New companies are looking to jump into the fray all the time, but it’s possible many are biding their time and waiting to see what actions the feds take regarding legal marijuana businesses.
So what does it mean for the cannabis industry’s investing potential? Well, it looks like it’s time to be bullish on the emerging market, with plenty of time to still get in early. Read on for three big reasons to be bullish on cannabis.
1. Room for growth is unprecedented
As previously mentioned, the cannabis industry is still in its infancy. One of the two states that voted for legalization has yet to even open the market, and the other is not even a full year into its experiment. If Colorado’s reported numbers are accurate and continue to grow, it’ll be hard for other states to ignore the potential benefits legalization could have on their budgets. In fact, many other states have already taken notice and started to work on legalization legislation of their own.
The Motley Fool reports that there are currently legislators working on legalization plans in 19 states, with the two most likely to pass laws in the near future being Oregon and Alaska. It also mentioned that while some states face stiff opposition in the face of legalization, steady revenue streams can help turn the tide of opinion.
Not only is the market set to expand, but so are the range of business opportunities. There’s a lot more to the cannabis market besides simple retail locations. Entrepreneurs have started marijuana tourism companies, boutique snack lines, and even food trucks that serve THC-rich meals. The fact is, there’s room for investing in all manners of enterprise when it comes to cannabis.
2. Money talks
The most apparent and obvious reason investors should be paying close attention to the marijuana market is the vast amount of money-making potential it has. We’re already seeing the kind of cash Colorado is bringing in during only several months’ worth of retail sales in a market that is mostly alive and well within the Denver metro area. By the end of the year, we should be able to get some information on the revenues Washington state is seeing reported, as well, and get a clearer picture of exactly what kind of potential we’re talking about, as well as how differences in regulation might play into it.
Given some time to mature, the market in Colorado alone could yield staggering revenues, not only for entrepreneurs but for investors. The key to getting in on those revenues will be to act early as the stigma associated with marijuana stocks quickly fades away and interest bubbles up. According to MarketWatch, a recent survey has shown that more than 97 percent of respondents and investors maintain an interest in the marijuana market, with a huge number — 76.69 percent — identifying as “extremely interested.”
With the amount of interest that cannabis stocks are garnering, it probably won’t be long before a lot of capital starts flowing toward entrepreneurs and marijuana-based companies. The key here will be to get in early and watch for different methods of legalization that states choose to employ. Different tax rates and other regulations could have an effect on where investors place their money, so some keen qualitative analysis will be required.
3. Big pharma
Perhaps the biggest industry holding an interest in the new marijuana market are members of the pharmaceutical industry. Cannabis has been shown to exhibit potential in treating all kinds of medical conditions, including anxiety, pain relief, and even fighting against some types of cancer. These benefits led to medical marijuana bills being passed in a large number of states, which is where the legalization effort has stalled, for now. While many medical professionals and big pharmaceutical companies have been hedging their bets on cannabis, things appear to be shifting in favor of adopting the plant’s use for commercialization.
There are examples of pharmaceutical businesses already using cannabis and its compound in their products. GW Pharmaceuticals (NASDAQ:GWPH) is one such example; it makes treatments based on cannabis-extracts. In fact, one of the the company’s most popular products, Epidiolex, is being fast-tracked for sale in the United States after it was shown to be effective in treating childhood epilepsy. Maryland-based Nuvilex Inc. has also been making waves with its treatments for fighting breast and pancreatic cancers.
Big pharma may be headed to a point where adopting cannabis into its products will become a necessity. The one drawback for most pharmaceutical and medical companies has been the fact that marijuana is still illegal at the federal level, not that the plant hasn’t shown promise in clinical settings. As public opinions shift, and prohibition laws with it, an unprecedented opportunity for big companies to take chances with cannabis will spring up.
For investors, all the signs are pointing to a bright future in the marijuana market. But the key to getting in on the cannabis market may be to get there early, so don’t ignore your bullish investing instincts.