Marijuana, excuse the pun, has been growing like a weed for some time now. Just 21 years after California became the first state to legalize cannabis for medical purposes, there are now a total of 28 states that have legalized medical marijuana. Likewise, just a little over four years after voters in Washington and Colorado voted to legalize recreational pot, eight states in total have done so.
Marijuana's blazing growth
One reason cannabis has been gaining such rapid momentum in the U.S. is the improving opinion of pot among the general public. National pollster Gallup has been conducting surveys on marijuana for nearly five decades, and the percentage of the public that'd like to see it legalized nationally has increased from just 25% in 1995 to 60% (an all-time high) in 2016. As favorability toward the drug improves, more and more states have been legalizing pot either for medical or recreational uses.
Image source: Getty Images.
governments have played their role, too. Legally growing and selling marijuana provides new channels of revenue for state governments to collect taxes and licensing fees. In Colorado, $135 million in tax and licensing revenue was collected in 2015 on $996.2 million in legal weed sales, while in California, the passage of Prop 64 this past November (which legalized recreational pot) is expected to add an estimated $1 billion in tax revenue to the state.
Lastly, the significant growth potential behind marijuana has been an allure. Legal marijuana sales hit $6.9 billion in 2016 according to cannabis research firm ArcView, a 34% increase from the previous year. ArcView believes this figure could grow to $21.6 billion by 2021, while investment firm Cowen & Co. believes legal pot sales could tip the scales at $50 billion by 2026.
Marijuana stocks offer plenty of business diversity
This latter point is what's attracted a flurry of marijuana companies to go public in recent years, giving investors a veritable sea of marijuana stocks to choose from.
One thing marijuana stocks definitely don't lack is business diversity, offering investors a lot of ways to potentially capitalize on marijuana's growth.
Image source: GW Pharmaceuticals.
Perhaps the most well-known cannabis stock is cannabinoid-based drug developer GW Pharmaceuticals (NASDAQ: GWPH) . GW Pharmaceuticals has discovered more than five dozen different cannabinoids from the cannabis plant, and it uses these cannabinoids to access the natural CB receptor system in our bodies. Easily the most successful experimental drug to date in GW's portfolio is Epidiolex, a cannabidiol-based drug that met its primary endpoint in phase 3 studies for two types of childhood-onset epilepsy, Dravet syndrome and Lennox-Gastaut syndrome.
Along those same lines, Medical Marijuana (NASDAQOTH: MJNA) licenses its cannabinoid testing and research to the medicinal cannabinoid industry. Medical Marijuana also provides management and consulting services, as well as chewing gum-based cannabis products.
But there are numerous pot stocks outside the biotech realm. Right now there are companies that are:
- Developing marijuana breathalyzer devices for law enforcement;
- Focused on consulting services for pot businesses;
- Manufacturing THC-infused beverages and foods;
- Providing banking solutions to marijuana companies;
- Developing cloud-based technology to run point-of-sale and ordering systems for pot retailers;
- Providing marketing services;
- Leasing cultivation space and facilities;
- Developing new and innovative lighting products for indoor grow farms.
This list could go on for quite some time. The point is that retail sales from dispensaries are far from the only way marijuana businesses are looking to take advantage of legal sales growth.
Image source: Getty Images.
Marijuana stocks share one common theme
Unfortunately, despite this business diversity, marijuana stocks do share something in common: they're basically all losing money, and there's nothing to suggest that this money-losing trend will ebb anytime soon.
Some investors might be quick to point to INSYS Therapeutics (NASDAQ: INSY) , a profitable stock commonly called a "marijuana stock", to debunk this thesis. However, INSYS generated essentially all of its $55.2 million in sales during the third quarter from a sublingual drug known as Subsys, which isn't marijuana-based. It's not exactly fair to refer to Insys as a marijuana stock until it generates a decent percentage of its sales from its dronabinol-based medicines.
