It’s no secret that the cannabis industry is ripe for investment opportunities. The industry has been labeled as the ‘next frontier’ for savvy investors ever since marijuana started becoming legal for medical and recreational usage. Logically then, as it becomes more widely legalized across the country, cannabis is only going to attract more attention (and money). And as you would expect, a multitude of companies are – and will continue to be – popping up in various capacities relating to the industry.
Of course, we’ve seen this sort of thing many times before. The most notorious is the Dot.com boom of the late 90’s. Everyone wanted a piece of the World Wide Web, as we called it back then. And while we were right to be excited about the changes the internet was going to make on our lives, there was very little discretion among investors at the time. Remember Pets.com?
It’s not much different these days with regard to the cannabis industry. There will surely be some huge winners in the space. On the other hand, there will also be plenty of fly-by-night companies, trying desperately to get a piece of the action while the market is in rapid expansion mode.
My job is to help investors differentiate between the real prospects and the duds. We’ll do this, over the course of a series of articles, by looking at how various types of companies fit in with the overall cannabis industry.
The most obvious place to start with is the medical marijuana space. Why? Because it’s the most mature area of the industry and is already producing compelling companies to buy.
The benefits of marijuana as a medical treatment are numerous. The drug can be used to help treat everything from glaucoma to seizures, and is particularly useful at dealing with pain and discomfort. Generally speaking, marijuana’s ability to lessen pain and relax the body makes the drug a viable treatment method for a wide variety of medical cases.
While recreational marijuana legalization has greater political obstacles to overcome, the legalization of medical marijuana nationwide is pretty much a no-brainer. The widespread adoption of medical marijuana (in 24 states and counting) means there’s an obvious demand for the drug. According to ArcView Market Research, the legal marijuana market reached $5.4 billion in 2015, after growing 17% from the previous year.
In the next article, we’ll get into the diversity of the medical marijuana industry, and what type of companies you can expect to find. For now, let’s take a quick look at the granddaddy of medical marijuana companies, GW Pharmaceuticals (GWPH). The company focuses on developing and commercializing cannabinoid prescription medicines.
A Nasdaq-listed company, GWPH is probably the safest way to invest in medical marijuana right now. The company sports a nearly $2 billion market cap and trades over 700,000 shares a day on average. GWPH also carries $278 million in cash on its books compared to just $15 million in debt. In other words, it has obvious staying power.
GW Pharmaceutical’s primary product is Sativex, a spray used for the treatment of spasticity due to multiple sclerosis. The company is also in Phase III clinical development of Sativex for treating cancer pain. What’s more, it has another product in its pipeline called Epidiolex for treatment of various conditions from epilepsy and diabetes to Dravet syndrome and schizophrenia.
It’s clear why investors are so keen on GWPH. The company is already generating revenues (about $30 million of the last year), while maintaining a solid balance sheet. There are also plenty of reasons to be optimistic about the company’s future with the upcoming potential treatments in its pipeline.
If you’re looking for a place to start investing in marijuana, you would be hard-pressed to find a better first investment than GWPH. Next time, we’ll look at the medical marijuana industry in more depth.
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