Profits in This Market Are About to Rocket
Companies / Investing 2014 Apr 09, 2014 - 02:15 PM GMTBy: Money_Morning
Peter Krauth writes: It's not often a new kid makes it onto the commodities block.
So I'm going to step beyond the realm of regular resources to discuss one that's burgeoning.
But like most new things that push existing boundaries, it's controversial.
Change can be disrupting... but it can also - in this case - be hugely profitable.
It's acquiring the marketplace qualities of long-traded commodities... one that has the opportunity to be its best performer for years to come.
You may have guessed I'm talking about cannabis.
And its controversial past is leaving a massive upside on the table to add double-digit (or more) gains to your 2014 portfolio now...
The Market Is Taking Shape and Stabilizing Profit Plays
We all know the Netherlands has decriminalized marijuana possession, allowing it to be sold in so-called "coffeeshops."
But April 1st brought important changes on the marijuana front in Uruguay. On that day, it became the first nation to allow the growing, sale, and consumption of pot, breaking totally new ground in the process.
Uruguayans of legal age can now purchase up to 1.4 ounces monthly from licensed pharmacies, and they will be monitored by a government database. Effectively, the country has legalized the entire process, from production to consumption, something no other nation has ever tried.
The Uruguayan government has done so in part to fight drug trafficking. Their hope is to gain the upper hand by regulating and taxing a market currently dominated by criminals.
The small nation of 3.3 million has evolved into a passage route for marijuana from Paraguay and cocaine from Bolivia. That has translated into a Uruguayan prison population where fully one-third of inmates are doing time for narcotics-related charges.
Enforcement and incarceration are both very expensive for governments.
But it's not just the cost of arresting, prosecuting, and jailing growers, dealers, and users that's motivating the legalization of pot.
At a time when government budgets are already overstretched, lawmakers are slowly recognizing that they're losing their so-called "war on drugs."
Pair that with medical benefits, and legalization is gaining traction in the U.S.
So far, 20 states plus the District of Columbia have legalized medical marijuana use with a doctor's recommendation. Of those, Colorado and Washington have gone a step further, allowing the use of marijuana for recreational purposes as well.
According to WebMD, the main use of medical marijuana is to treat pain typically caused by headaches, a disease like cancer, or even glaucoma or nerve pain.
And it appears those medical benefits can be significant, not to mention still massively underexplored.
Two Booming Markets in One
Of the nearly 500 compounds contained in cannabis, some 80 are used for scientific and medicinal purposes.
According to Agriconsultant, five of the most commonly used compounds are:
- Tetrahydrocannabinol (THC): Psychoactive effects, but relieves mild pain, induces sleep, is antioxidant
- Cannabinol (CBN): May limit spread of cancer cells, reduces muscle spasms, fibromyalgia, and insomnia
- Cannabidiol (CBD): A primary compound for medical marijuana, proven to relieve convulsion, inflammation, anxiety, cough, congestion, and nausea and inhibits cancer cell growth
- Beta-Caryophyllene: Reduces inflammation
- Cannabigerol: Relieves intraocular eye pressure, used in glaucoma treatment
There are two main marijuana plant species, sativa and indica. Sativa has more stimulative effects, lifting appetite and energy, while indica tends to relax muscles, lessen pain, and encourage sleep.
In order to gain the benefits of both strains, growers have created hybrid plants. Most of the medical marijuana today is sourced from hybrid indica.
As for consumption for medical purposes, smokeless vaporizers that are mostly odor-free are becoming more popular than smoking. And the benefits are considerable; 95% of cannabinoids are used, the medicinal effects happen within seconds, few if any delicate cannabinoids are destroyed, and toxins are minimal.
In Canada, for example, medical marijuana is used to treat severe arthritis, spinal cord injury, aids/HIV infection, multiple sclerosis, spinal cord disease, cancer, and epilepsy.
Leverage the $100+ Billion Projected Growth Opportunity
Some estimates call for total cannabis sales (medical and recreational combined) in the U.S. market to eventually reach as much as $120 billion annually, perhaps rivaling alcohol and tobacco, which had combined sales of $263 billion in 2008.
With increased acceptance and legalization of marijuana for both recreational and medical purposes, this is one resource whose production and use are sure to grow exponentially, perhaps for decades.
Which, of course, has left no shortage of penny stocks jumping into the fray...
The Marijuana Index was set up to track 36 cannabis-related companies listed on the various U.S. exchanges. To say the index has been volatile would be the understatement of the year.
The Index's 52-week low was nearly a year ago at $0.66, but saw a blistering 10,500% run up to nearly $70 in late February, for a performance reminiscent of Bitcoin. It has cooled off considerably since then, giving back more than 72%, to trade near $19 more recently.
My colleague Michael Robinson, Money Morning's Tech Specialist, recently highlighted GW Pharmaceuticals PLC- ADR(Nasdaq: GWPH), and it's my top choice within this sector. With a $840 million market cap, GWPH is in its own cannabis class.
The company is developing a portfolio of cannabinoid medicines. Its lead product, Sativex, is approved to treat spasticity from multiple sclerosis in more than 20 countries, and it boasts a pipeline of cannabinoid drugs in development.
MediSwipe Inc. (OTCMKTS: MWIP) is an interesting but much smaller play. The company mainly offers secure transaction processing and security solutions for the medical and healthcare industries. The interesting angle is the company's turnkey solutions for electronic transaction processing in the medical marijuana sector, and cloud-based patient data management. Furthermore, they provide equipment leasing and credit facilities for large-scale grow and retail operations and even sublease parcels of land in Colorado to fully licensed and compliant growers.
An intriguing but very high-risk play is a company called Republic of Texas Brands Inc. (OTCMKTS: RTXBQ). Use extreme caution, as it's actually looking to emerge from a Chapter 11 reorganization soon. Most attractive is the company's Chillo Hemp energy drink, sales of which could help achieve that goal. A cannabis-based tea drink is also in the works. It could get interesting, as the company has partnered with Amazon.com to sell Chillo.
Marijuana has long been associated with so-called "potheads" and shunned as an illegal drug. But I'd like to leave you with a thought-provoking quote from Dr. Sanjay Gupta, CNN's chief medical correspondent and neurosurgeon:
"It doesn't have a high potential for abuse, and there are very legitimate medical applications. In fact, sometimes marijuana is the only thing that works. We have been terribly and systematically misled for nearly 70 years in the United States, and I apologize for my own role in that."
As the wider public comes around to similar conclusions, this is one commodity that's sure to flourish.
Source : http://moneymorning.com/2014/04/09/double-digit-or-more-profits-in-this-market-are-about-to-rocket/
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