Cannabis acceptance has grown with each passing year, with 2018 on pace to be a truly banner year for the legal pot industry.
To our south, Mexico legalized medicinal cannabis in June 2017.
In the U.S., Oklahoma recently became the 30th state to pass broad-sweeping medical marijuana laws.
And to our north, Canada is about to become the first industrialized country to allow adults to purchase recreational marijuana. When adult-use sales commence on Oct. 17, the door will be wide open for billions of dollars in annual sales to flow into the legal pot industry.
There are a lot of ways to gain exposure to pot stocks
Between shifting consumer opinions and these massive dollar figures, investors have been eager to put their money to work in marijuana stocks. But what you may not realize is there's more than one way to gain exposure to the industry. In fact, there are nine different ways you can consider investing in marijuana stocks.
1. Buy a grower
The easiest way to gain exposure to the marijuana industry is to buy a cannabis grower — and there are plenty of pot stocks to choose from in this regard. While I'm personally not enthused about current valuations within the industry, New Brunswick-based OrganiGram Holdings (NASDAQOTH:OGRMF) is my favorite pot stock.
In March, OrganiGram substantially increased its annual peak production capacity to 113,000 kilograms from 65,000 kilograms, albeit it'll take until April 2020 to complete expansion at its Moncton facility. With a keen focus on cannabis alternatives, such as oils, and its three-tiered growing system, which maximizes space efficiency while reducing costs, OrganiGram appears to be in great shape from a margin perspective.
Another way investors can take advantage of the cannabis craze is by focusing on companies that handle the packaging, marketing, and branding of pot products. As a reminder, Health Canada set some pretty stringent regulations on what can and cannot be on the packaging of marijuana products when they're on retail shelves.
One company tasked with keeping growers in the good graces of Health Canada and individual U.S. states that've legalized is Kush Bottles (NASDAQOTH:KSHB). Kush's third-quarter operating results showed a 173% year-over-year increase in sales, albeit some of this increase included its acquisition of hydrocarbon gas and solvent company Summit Innovations. Already serving more than 5,000 marijuana businesses worldwide, Kush's importance as a niche middleman could be the perfect way for investors to gain cannabis exposure.
3. Choose a dispensary
Investors could also choose to buy a marijuana dispensary, such as MedMen Enterprises (NASDAQOTH:MMNFF). Earlier this year, MedMen became the largest U.S.-based pot stock to seek listing on the Canadian Securities Exchange.
Right now, MedMen has 13 operating stores in three states (California with eight stores, New York with four, and Nevada with one), with three in development in Nevada. By 2020, MedMen has aspirations of operating 50 upscale dispensaries. Plus, with U.S. federal law forbidding the interstate transport of marijuana, the company also owns its own grow farms in the states it's operating in. This allows for complete control of the vertical cannabis supply chain.
4. Dig into a cannabinoid-based drugmaker
You could also consider purchasing a cannabinoid-based drug developer. In June, GW Pharmaceuticals (NASDAQ:GWPH) became the first drugmaker to receive an approval for a cannabis-derived drug from the Food and Drug Administration.
In multiple late-stage trials, GW Pharmaceuticals' lead drug Epidiolex, a cannabidiol-based oral medicine, led to a statistically significant reduction in seizure frequency, relative to baseline and the placebo, for patients with Dravet syndrome and Lennox-Gastaut syndrome. Epidiolex's approval may be the spark that launches debates on Capitol Hill about rescheduling or de-scheduling cannabidiol.
5. Pick a cannabis streaming company
If you're looking for exposure to the pot industry, a streaming company like Auxly Cannabis Group might work. Though Auxly does directly own a few smaller grow facilities, it primarily provides up-front capital to small- and medium-sized growers in exchange for a percentage of their yield at a below-market rate. Auxly can then turn around and sell this product at market rates, pocketing the difference as profit.
Generally, streaming deals lead to robust long-term margins. But something for investors to consider here is that with per-gram cannabis costs paid to its licensed partners being mostly fixed, Auxly could struggle to reduce its costs if marijuana becomes commoditized over time. In other words, whereas growers can benefit from economies of scale, that won't be the case with Auxly. This means investors would need to keep a close eyes on per-gram pot prices.
More at: Fool.com
The Only Foolproof Marijuana Investment Strategy
Folks have already made as much as 1,389%, 500% and ten times their money from marijuana.
Early investors could see their starting stakes turn into retirement fortunes, as the industry is expected to surge 4,067%.
And if those gains were simply triggered by state laws, imagine the profits when it becomes legal for the entire country.
Using a strategy developed over 20 years in the commodities sector – resource investing expert – Matt Badiali has uncovered the best way to profit before Washington grants full legalization.
It’s the perfect way to ride the coming 4,067% market surge.