The $50 Billion Business Growing Like a Weed

A special note from Edelson Institute Executive Director Mike Burnick: Sean Brodrick has a knack for discovering small resource plays with massive upside potential. But the next gold rush may not be in metals at all but, rather, marijuana. Sean’s latest research suggests that you might want to start seriously thinking about investing in this $50B industry soon. See if you agree …

States around the country are sounding the starting gun on a new gold rush for investors. Not in metals. In marijuana.

In November, four more U.S. states voted to legalize recreational marijuana. Those were Maine, Nevada, Massachusetts and the biggie, California.

That makes eight U.S. states, plus D.C., where marijuana is legal. Add those to 28 states that allow medical marijuana. And even more are exploring some form of legalization or decriminalization

All this is putting the “biz” in cannabis. So how much is it worth?

Today, only about $6 billion in legal sales. But like any weed, those sales are going to grow quickly.

Analysts at Cowen & Co. estimate that there is another $25 billion in black-market pot sales. Those could add to the legal side of the ledger very quickly. All told, Cowen thinks the cannabis industry could be worth $50 billion by 2026.

What does that mean for individual states? Well, Colorado is helping lead the way on legal pot. It saw $1.3 billion in legal marijuana sales last year. That generated $200 million in tax revenue.

That was last year. This year, Colorado’s combined sales of medical and recreational marijuana totaled over $235 million in January and February. That’s up 30% from the same period last year.

This is happening even though marijuana prices are going down, thanks to free-market competition.

Look North 

Canada is on the path to full legalization. Full legality means that companies will be able to operate without fear of federal interference or confiscation.

Indeed, it takes effect July 1, 2018.

That means banks and credit cards will work with Canada-based marijuana companies.

It also means that a crusading attorney general won’t be chasing after entrepreneurs who just want to make money.

And that means we could be at a tipping point for investors.

Investing in Marijuana 

After a rip-roaring 2016, widely owned marijuana stocks stumbled in 2017.

Only three of 21 companies in Bloomberg’s global cannabis index have positive earnings. And they’re all medical marijuana companies. But that should change in the future, as recreational marijuana comes into its own.

Just remember, this is a market in flux. For example, on average in 2016, a pound of marijuana went for $2,500. Now, the price has dropped to $1,000. The more prices drop, the more growers and dispensaries get squeezed.

So what should investors look for?

I spoke with Scott Greiper, the president of Viridian Capital. It’s an investment banking firm with a focus on cannabis. Along with raising capital for cannabis companies and doing M&A, Viridian acts as strategic advisers to the CEOs and boards of budding marijuana companies.

We spoke by phone, but Mr. Greiper and I will meet at the Southeast Cannabis Conference & Expo in Ft. Lauderdale on June 9.

Greiper says most people might be surprised by the level of professionalism in the room.

“There’s been a change since early 2014,” he says. “There’s a clear and accelerating trend of more entrepreneurs coming in, more professional CEOs, and more professionalism in the investors.

“Bloomberg calls this the fastest-growing market in the world.”

Critical Considerations 

Greiper’s most important advice to any investor new to the marijuana space is to understand the management.

“A lot of operators of cannabis teams don’t have a track record of building and selling businesses,” he says.

“They’ve been growing, but they don’t have business acumen. This is the biggest risk for investors.”

He says the first thing he does is check that the management team had previous success in growing a business.

“I look for a CEO who does not come from the marijuana business,” he says. “Instead, they’ve pivoted in.”

Greiper went on to say he avoids companies that are relying on high marijuana prices. “This is a commodity crop, just like wheat or corn,” he said. “I look for business models that can work with a declining wholesale price.”

Risk Tolerance 

Greiper pointed out the importance of determining your level of risk tolerance.

“There is a line of demarcation in cannabis companies,” he says. “Those that touch the plant and those that don’t.

“Ancillary providers have a lower risk profile. They are providing software, security, or own the land the cannabis grower sits on.”

He added that California’s legalization was really important. The timeline for the state to start issuing licenses to those eventual pot shops is Jan. 1, 2018. “It’s the largest single cannabis market in the world. California is truly the epicenter of the industry.”

He went on to say that legalization in the rich population centers of Massachusetts and Florida are important milestones, too.

The Gold Standard 

I asked Greiper about Canada. He said investment money is surging into the cannabis industry there.

“Canada is the gold standard right now. It is a federally legal medicinal marketplace. Next year, it becomes a federally recreational market.”

As a result, Canada doesn’t have the “haziness” of the U.S. market, he adds.

We’ve seen U.S.-listed cannabis stocks generally drop in price since the beginning of the year. Greiper believes a lot of them got overbought. “But if you do your homework, you can find strong management teams.”

I look forward to getting more insight from Greiper at the conference in Ft. Lauderdale.

Bottom line: If you’re careful … and if you are selective in your choices businesswise and geographically … I think investors in this field could make fortunes.

All the best,

Sean Brodrick

P.S. The New York Times calls legal marijuana “The Next Gold Rush.” And Shark Tank’s Kevin O’Leary says, “This is like the end of prohibition. It’s going to be a remarkable opportunity. The cashflow in Colorado is THREE TIMES what they thought it was going to be.” See why the next gold rush is likely to be green instead.

Leave a Reply

Your email address will not be published. Required fields are marked *

Comments 14

  1. Ken Lane May 31, 2017

    Major international symposiums on marijuana: Helsinki in 1975, Reims in 1978, Louisville in 1982, Oxford in 1984, Paris in 1992, and New York in 1998.
    Among the most telling observations/conclusions: The current molecular studies reported in this volume (Marijuana and Medicine, 1999) indicate that the multiple medical effects of marijuana may be accounted for by an interaction of the drug with basic regulatory signaling mechanisms of the lipid bilayer and integral receptors of the cell membrane.
    The unique deregulation of cell membrane signaling by THC impairs the function of the brain synapses, gametes, and cells of the immune system.


  2. mrperfect4736 May 27, 2017

    I am a member with two of your services both have spec stocks why aren’t weed stocks in there spec portfolio or are they your secret?


  3. wireline9 May 26, 2017

    I am sorry, but I paid for this program for actionable information not generic information that I am constantly been teased by hundreds of emails a day. Give me a stock and a price target, don’t waste my time, as time is money.


  4. ROBERT M. SAULS May 25, 2017



    • wireline9 May 25, 2017

      same here


  5. luther May 25, 2017

    so please explain what do you suggest to invest in for this GREEN bisuness


  6. joe silvia May 24, 2017

    here is my great idea. just give us the name of the pot equivalent to royal gold and silver wheaton. then we can just sit back and collect our pot royalties for life…


  7. TOE NYUNT May 24, 2017

    I like that


  8. Craig Howe May 24, 2017

    What gives with the forcaste on Gold going to $4000 oz ?


  9. Bob Schubring May 24, 2017

    The legal basis of cannabis prohibition is shaky. Present US federal anti-cannabis law was created in 1974, after the previous anti-cannabis law from 1934 was held unconstitutional by the US Supreme Court. The current law relies on the Surgeon General to rule on whether a drug has medical uses and whether that drug is dangerous. Cannabis is allegedly dangerous and allegedly useless. On that basis, it is more-strictly prohibited than cocaine.

    The problem that arose, due partly to states legalizing medical cannabis, and more so, by Israel, which legalized private drug companies to study cannabis, identify the substances in it, and patent any such substances that have medicinal value. We now have a federal Drug Enforcement Agency screaming the party line, that cannabis is dangerous and useless, and also a federal Patent and Trademark Office which granted patents to the Israeli inventors who found useful drugs in the cannabis plant.

    Logic dictates that these two contradictory ideas cannot both survive in the law. If there are patented medicines made from purified cannabis, then cannabis itself cannot be both a useful source of impure medicine and at the same time be useless. It’s either useful or useless, but it can’t be both useful and useless at once.

    Adding to the embarrassment, Gerald R Ford suggested allowing American drug companies to do the studies that Israeli firms finally undertook. The US DEA prohibited that research by threatening to confiscate the assets of US drug companies that tried to grow cannabis and study what was in it. This delayed by 40 years, the availability of these now-Israeli-owned medicines, to American patients.

    The Drug Enforcement Agency trained it’s agents to lie and deceive criminals so as to gain access to their businesses and make arrests. It’s now becoming apparent that those agents used their skills to lie to Congress.

    The sooner Congress ends payments to the DEA, the better.


  10. Stephen Ettinger May 24, 2017

    To Sean Brodrick,
    There are hundreds of Cannabis companies popping up all over the place. You have to know someone who is linked directly to the product for medical purposes to understand where the growth is, who is the pioneer and innovator in quality growth of the product. I find it interesting that you would comment on how the opportunity to make a fortune in this field is right I front of us yet you offer no concrete names of a single company that can make us a fortune. We all know there is money to be made short of doing the business ourselves. If you are going to write about it to your readers, then provide us with quality companies that are legit, and give us a few names. There are hundreds of names out there. It would take 1000 hours to go thru it all, confirm who is real, and who is a waste of time. So give us some names since you have opened up the dialogue. Thank you kindly.


    • david yale June 1, 2017

      I agree. Or are you setting us up for another subscription ad?


      • divine1228 June 2, 2017

        I agree. Another ad subscription. You can watch the steak being grilled but do not think about tasting it! Not like the old days when Larry got me into glamis gold at $1.77 per share.(1999/2000) I got many thousands of shares. And it is still paying my daughters college to this day. I sold them at around $17.50. No typo. Any real men there that can step up to the plate and produce home runs any more?