It used to be taboo.
Now, cannabis is poised to take 2018 by storm.
Only a few years ago, marijuana was seen as a ‘’gateway drug’’.
Flash forward to today: cannabis is a huge business, one that could be worth $25 billion in the U.S. alone by 2020, and analysts expect demand to skyrocket as new laws are passed and social attitudes change.
In the United States, the legal cannabis industry is worth $6.7 billion, according to Bloomberg. A dozen states have passed more relaxed laws and in October 2017 public support for legalizing marijuana reached an all-time high of 64 percent.
In Canada alone, cannabis is estimated to become an $8 billion market with 300,000 people using marijuana for medical purposes today. When pot is legalized by the Canadian federal government this year, that number could double virtually overnight…to say nothing of the 5 million Canadians who use pot recreationally.
Demand could increase dramatically after pot is legalized for recreational purposes in the coming months.
By 2021, there could be 3.8 million legal users consuming 420,000 kilograms of pot.
While the potential for growth is huge, the legal cannabis industry is still in its infancy. At the moment, legal growers supply only 60,000 kilograms of Canada’s weed, or 7 percent of anticipated total medical and recreational demand.
Only $220 million was invested in cannabis in 2016. Yet that’s a significant increase from investment in 2013, which was a scant $13 million. In 2018 alone, there has already been over $1 billion raised by publicly traded cannabis companies in Canada.
It can be a challenge to invest in cannabis. Most publicly-traded firms are small-caps, and some are downright speculative. The immense enthusiasm for cannabis in early 2018 has led to fears of a bubble forming.
But that doesn’t mean that major opportunities aren’t out there, waiting to be seized. Marijuana has become one of the most exciting investing sectors in North America, and that buzz won’t go away any time soon.
Smarter investors can look for ways to profit from the rise in cannabis without exposing themselves to too much risk. This presents some unique opportunities to get in on the ground floor, especially when you look at new and specialized growers and the likelihood that larger firms, particularly those in the tobacco trade, will get in on the action as well.
Here’s a look at some companies that are getting into the cannabis game:
Philip Morris (NYSE:PM)
Investors often look to Big Pharma to find solid plays in the booming cannabis sector, but alternatively, they should be looking at Big Tobacco.
Back in the 1960s, when social interest in marijuana began to grow, rumors circulated that Big Tobacco was buying up brand names for marijuana products. But the government crackdown on drugs put that on the backburner.
Now, Big Tobacco is looking to get back into the marijuana market, since it’s clear that big money could be at stake. As cigarette smoking declines, Big Tobacco has started pushing e-cigarettes. Now they could do the same with marijuana.
Philip Morris is no exception. As its stock declines with news of falling cigarette sales, the massive tobacco firm can tell which way the wind is blowing.
Its 2016 investment in Israel’s Syqe Medical was the 2nd largest deal in the cannabis space that year. It plans to invest $20 million in Syqe Medical.
The company now owns a patent for a GMO plant with high terpenes, with application in the medical marijuana market.
As Tobacco markets have grown more mature, the company has been exploring reduced-risk smoking products, with its heated-tobacco iQOS system currently under considerationby the U.S. Food and Drug Administration as a “modified risk tobacco product.”
Philip Morris is playing it safe: it continues to argue that marijuana is illegal and does not constitute a safe investment.
These are quiet moves, but wise investors know that Big Tobacco will make a move into marijuana as soon as the waters are right.
Cannabis Wheaton (TSX-V:CBW; OTC: CBWTF)
Without question, the biggest frontier in the marijuana market is Canada.
The country is looking at full legalization by late Summer 2018, which would make it the world’s first federally regulated major marijuana sector.
No Canadian cannabis company is growing as quickly as Cannabis Wheaton. The company’s unique approach to fight the supply deficit takes a leaf out of Netflix’s book: “streaming weed,” where the company offers growers capital to build out or expand their cultivation facilities in return for a minority equity interest and a “stream” of cannabis.
The company is also “vertically-integrated,” with investments throughout the cannabis supply chain from “upstream” production to “downstream” marketing and distribution.
It’s bringing the old Big Oil playbook to the cannabis sector: cover every part of the chain to reduce costs and maximize profits.
CBW has producers lining up. The company has over 15 partners, with 17 facilities and a potential 2.0 million effective square feet of productive acreage.