Will There Be Marijuana Millionaires?
Missing out on an emerging sector or industry can be one of the most costly mistakes you’ll ever make in your investing career. Finding and identifying the next breakout sector can be a surefire way to see huge returns on your investments. The difficulty lies in determining which sectors are on the rise. With that in mind, let’s take a look at the marijuana industry; are we about to see a whole new group of marijuana millionaires?
Making an educated stock analysis of the marijuana market means more than just looking at the traditional financial metrics.
Some projections show medical marijuana sales growing from $4.7 billion in 2016 to $13.3 billion in 2020. Adult recreational sales are also estimated to jump from $2.6 billion in 2016 to $11.2 billion by 2020. Those are some huge gains in a short period of time, and such growth potential carries with it the ability to make a lot of marijuana millionaires in the coming years. (Source: “Marijuana Industry Projected To Create More Jobs Than Manufacturing By 2020,” Forbes, February 22, 2017.)
The industry is also set to create as many as 300,000 jobs in the U.S. by 2020. And we’ve seen absolute explosions out of companies like Aurora Cannabis Inc (CVE:ACB), with ACB stock rising over 4,500% in 12 months. Great numbers, right?
The problem is, the numbers don’t tell the whole story.
Yes, they’re exciting. Yes, they seem to show a budding market with tons of opportunities for investors to enter on the ground floor and take advantage of the fast-growing sector. And those are all true statements.
The issue is that when it comes to marijuana stocks for 2017, there’s a lot more at play than just the number projections. The drug needs to be legalized, or at least not heavily regulated to the extent that it currently is in much of the world. These numbers are based on production and consumer demand, but don’t take into account the unpredictability of the political sphere, especially when looking at marijuana stocks.
That’s why any fair analysis of the marijuana industry needs to examine not only the projections, but also the political realities surrounding what is currently an illegal substance in many parts of the world.
Two countries demonstrate just how far the divide is between governments when it comes to the legalization of marijuana, both medical and recreational: the U.S. and Canada.
The Canadian government has promised to have legislation pushed through that will see the drug legalized within a year. The U.S., however, with the election of Donald Trump as president, has taken a decidedly different route.
Former president Barack Obama chose to take a laissez-faire stance on weed, instead leaving the situation up for the states to decide. Trump, and many members of his administration, have been quite harsh in their tones when discussing the future of marijuana in the U.S.
“Good people don’t smoke marijuana,” said Attorney General Jeff Sessions back in April 2016, when he was still senator of Alabama. “There is more violence around marijuana than one would think.”
White House Press Secretary Sean Spicer agreed.
“I do believe that you’ll see greater enforcement,” said Spicer during a press briefing in late February. “There’s a big difference between the medical use … [and] recreational use, which is something the Department of Justice will be further looking into.” (Source: “Marijuana sellers face uncertainty under Trump,” The Hill, March 8, 2017.)
Trump, overall, has been more uneven on the topic, but one would assume that with all the geopolitical instability, domestic issues, and potential world-ending nuclear war, he has more on his plate to contend with than whether the green herb gets legalized.
All the same, the little he did say about it was rather positive for weed enthusiasts.
“I think it’s up to the states,” said Trump in an interview with a Denver television station in August 2016, in response to a question about marijuana sales. “I’m a states person. I think it should be up to the states, absolutely.” (Source: “Brandon Rittiman’s Trump interview transcript,” 9NEWS, August 3, 2016.)
The states have been individually far more open to the drug. Eight states have legalized recreational marijuana use, and 29 states have voted to legalize medicinal marijuana. That means that the majority of the U.S. has access to legal marijuana in one form or another. (Source: “What Jeff Sessions Said About Marijuana in His Attorney General Hearing,” Fortune, January 10, 2017.)
Continuing down that road, we can assume that those aforementioned great-looking numbers will hold up. If, however, Trump switches his focus to cracking down on marijuana—not to mention earns himself another term with that same mindset—that would effectively hinder one of the largest markets in the world from gaining access to the product, setting those projections back.
Not to mention that Trump and the federal government could also choose to enforce federal regulations within the states, further crippling the already established marijuana businesses where it’s been legalized.
What is the Best Marijuana Stock?
Chart courtesy of StockCharts.com
Despite the potentially bleak political outlook and instability that the industry faces, there are still a great many investing opportunities for investors to jump in on.
While many marijuana stocks fall have small market caps, investors are not stuck investing in marijuana penny stocks, though those can be very profitable.
For investors looking for the one of the best marijuana stock to invest in, while ACB stock may be the more enticing option, their best bet could be Canopy Growth Corp (TSE:WEED).
The first billion-dollar market cap weed company, Canopy Growth has a lot of the makings of a great and stable industry leader. While other companies have faced controversies on everything from pesticides used in growing operations to possible shutdowns, Canopy has managed to largely steer clear of those pitfalls (though it has had its fair share of troubles as well).
Another benefit of WEED stock is that its growth has both been strong and steady. Over the past 12 months, the WEED stock price has risen over 200%. In 2017, the company has registered eight percent in gains.
While these numbers as of late are the not the most wild and enticing ones investors are bound to find in the industry, they are the safest bet. And being well-run, based in weed-friendly Canada, and otherwise proving itself as a legitimately well-organized business along the way have all made Canopy arguably the best marijuana company.
Investors won’t become marijuana millionaires overnight with WEED stock, but given time, this could be the best pot play on the market.
How to Be a Millionaire with This One Stock
Pretty much anathema to my praise of Canopy Growth, what about a company with much higher gain potential, but also more volatility? I understand that long-term investing in a stable growth stock is not everyone’s cup of tea. And for those looking for a more risk-reward scenario, look no further than Aurora Cannabis Inc.
ACB stock has seen gains upward of 5,000% at one time over the past 12 months, now settling in the 4,800% range. With such a huge upshot like that, you can bet that this company has the ability to replicate that type of surge in a short period of time, should the news swing in the weed business’s favor.
And that’s really the thing here: you have the potential to be a marijuana millionaire with a variety of weed stocks, but that’s hugely influenced by the political side of things.
If tomorrow Donald Trump claims that he wants to legalize weed across the U.S., that would have a profound effect on marijuana stocks, sending pot enthusiasts through the roof with massive gains on all their weed stocks.
These types of conditions are the ones that need to develop if we want to see more marijuana millionaires.
Canopy Growth could generate solid returns over multiple years, yes, but that stock would also skyrocket if such a drastic event like a Trump legalization push were to occur.
Though even then, Trump would still need the support of Congress to pass the drug law, so it would by no means be a done deal, but it just goes to show that the ability to make a lot of money in this market is very much present and very much real.
Marijuana Stock Prediction
So where are marijuana stocks going?
If investors want to try to be marijuana millionaires, they could try their hand at any number of the valuable marijuana penny stocks and hope that the politics fall in their favor.
On the other hand, if stability is what investors seek, they could go for Canopy Growth.
Ultimately the stock forecast for marijuana is hard to read, only because of how contingent it all is on volatile politics.
But the one thing to remember, as with any successful investment strategy, is to do your research beforehand and make sure you know the risks of the industry before jumping in.
Marijuana millionaires are a very real possibility, but so too are marijuana paupers. The key to avoid becoming the latter is reading which way the wind is blowing in terms of legalization before jumping in on the investment.
Emerging industries can be exciting and, more importantly, profitable. But they can also be dangerous.