Predicting the Future for the Best Pot Stocks
Wall Street is getting high on a drug, but this time it’s not a sedative with a fancy name. The new popular drug on “the Street” is marijuana, but not for the reason you think. It’s because marijuana is getting legalized left, right, and center, and traders are scrambling to make money off marijuana stocks.
The only problem is that prices have already shot through the roof, and new investors want to know what the marijuana industry outlook looks like. So, stay with me for my three marijuana stock predictions for 2018.
The multi-billion-dollar marijuana industry sprung up as a very lucrative investment avenue during the 2016 U.S. elections. That’s because one state after another voted to legalize the drug.
Plus, America’s northern neighbor has likewise given it the green light. This is no mere prediction; the Canadian government officially confirmed that it will legalize pot for recreational purposes by July 1, 2018.
That leaves us questioning the last century’s anti-marijuana campaign, when propaganda films like Reefer Madness highlighted marijuana use as one of the deadliest sins. Today, in hindsight, it seems like that propaganda did more good to the “sinful” drug than bad.
The truth is, if you tell people not to do something, chances are they’ll make a point to do it, either out of curiosity or out of rebellion. Experts call it “reverse psychology.” From where I see it, the campaign played a role in shaping people’s views on marijuana.
Today, weed use is more commonplace than many want to believe. In fact, recent surveys suggest that more Americans want weed to be legal than those who want it to be illegal. What’s more, marijuana use is now socially acceptable to a majority of Americans, even to people who may not personally use it.
Of course, investing in marijuana is likewise en vogue. So, if you think weed is only popular with the junkies, you couldn’t be more wrong. Why else would you be here reading marijuana stock predictions for 2018?
So, here I go Nostradamus on weed stocks, with my three prophecies for 2018.
We’ll see at least one prominent merger or acquisition in the North American marijuana industry that includes both the U.S. and Canada.
There are two reasons why I see that happening. One, because cross-border expansion will open doors to local marijuana companies. Two, because both “Big Pharma” and “Big Tobacco” are waiting to jump on the opportunity.
It’s no rocket science. You see, legalization of “medicinal” marijuana lures pharmaceutical companies, and legalization of “recreational” marijuana tempts tobacco companies. The big profit-seeking sharks wouldn’t want to miss a seat on this multi-billion-dollar ride.
It’s true that, for most other industries, consolidation usually happens at maturity. But the marijuana industry is growing at a supersonic rate, so it’s a no-brainer that maturity might be reached early.
Now, remember that there are two primary types of marijuana companies in business.
First are the growers of marijuana. These could be good acquisition targets for Big Tobacco, which might want to have its own in-house production facility.
Second are the marijuana biotech companies, which are busy deriving medicinal properties out of this green grass. Some of these companies, whose drugs have returned successful results from clinical trials, could become great points of interest for Big Pharma.
Regardless, a horizontal consolidation between these marijuana companies may also happen, in which two small companies (say, one in the U.S. and one in Canada) may merge to unlock synergies. All in all, I’m seeing something happening on those lines in the coming year. And those invested in potential acquisition targets could easily see their marijuana stocks multiplying.
The legal North American marijuana industry will cross the $10.0-billion mark.
Again, a no-brainer! Last year’s legal marijuana sales in the U.S. and Canada were roughly $6.7 billion, a jump of 30% year-over-year. Remember that legalization from most U.S. states came toward the end of the year 2016. So, for this year, it’s safe to assume that we’ll have a much higher sales figure when taking into account the full year.
By the way, this is still a very conservative estimate. That’s because the illegal market in Canada alone could be worth well over $20.0 billion by the most conservative of estimates. These numbers are unaccounted for in the legal sales figures. By next year, once weed is legal, Canada will skew legal sales figures to the north, so $10.0 billion might be an understatement.
It is utterly easy to guess that marijuana companies could make a killing. Naturally, the biggest winners will be holders of the top marijuana stocks.
And now for the last of my marijuana stock predictions, which could make holders of weed stocks very merry.
Prediction # 3
Rhode Island will likely legalize recreational marijuana, and Texas will likely legalize medicinal marijuana.
Again, these are no wild guesses. A number of U.S. states will possibly legalize marijuana in one form or another in the coming years. That’s because government representatives and policymakers in these states are turning pro-legalization. And why not? They see it as a great value-add to the state treasury.
Just look at Colorado, the first state to legalize recreational marijuana. The state made over $200.0 million in tax revenue in the last year from legal marijuana sales. And here’s the best part: a solid $40.0 million of the tax money went to developing public schools.
Now, I know that the Trump administration, particularly Trump’s Attorney General, is anti-legalization. But let’s face facts: state-level decisions rest with the state governments, even if red lights are flashed from the federal level.
Coming back to my prediction, you may ask: why particularly these two states?
For starters, in Rhode Island, medicinal marijuana is already legal. The state legislators have moved a bill to legalize recreational pot at least seven times. But now that two of the east-coast states right next door, Maine and Massachusetts, have legalized pot, pressure is mounting on Rhode Island policymakers.
Take note that it is now counter-intuitive for the state to maintain the ban on recreational use. That’s because Massachusetts is right in its backyard, and Rhode Islanders can just hop across into the legal territory to enjoy a joint or two. Rhode Island is so small that, border-to-border, pot enthusiasts won’t mind driving a few extra miles for the kick. It makes more sense for the state to legalize it and make money off of it.
Next, the reason why I see Texas as the next state to legalize medical marijuana is also very simple. It is the second-biggest state, and is where a big chunk of the U.S. population resides. Recent polls have clearly indicated that Texans are swinging in favor of weed legalization.
Also, more states on this side of the coast have legalized recreational marijuana and are adding tax dollars to their treasuries. If we can see that, so can the policymakers in Texas.
Now, the state’s 85th legislative session is taking place this year, and my gut feeling is that we’ll see a green signal from the “Lone Star State” sooner rather than later.
Now, with my marijuana stock predictions out of the way, ask yourself the important question.
Should You Invest in Marijuana Stocks Now?
It’s true that marijuana use has moved out from dark alleys to under the sun. Legalization has laid the groundwork for illegal drug money to flow into the legal pockets of governments and businesses. And, likewise, investors are pocketing gains on their investments in marijuana stocks, most of which have doubled or tripled in the last year.
But I hate to break it to you that investing in the pot industry is currently fraught with risk. That’s because we may be approaching a big green bubble and, sooner or later, it could burst. Disciplined investors must understand that no accomplished investor ever made money by following the herd mentality.
My advice is not to invest in “pink-sheet” or little-known marijuana penny stocks. Just because Uncle Joe made an overnight killing in weed stocks doesn’t mean you will too. The stars are not in everyone’s favor.
It’s true that the marijuana industry outlook looks rosy, but not all companies can stand the test of time. So, look for companies that have the fundamentals to support future growth. Invest in the right marijuana companies, and at the right time.
And remember, my marijuana stock predictions are just predictions. Nothing is set in stone. So, do your own research before investing. Good luck!