Capitalizing On Cannabis: Key Considerations For Cannabis Stock Investors

2014 started off with a surge in stocks tied to cannabis. As I detailed last week, volumes and prices soared as new investors poured into the market, induced apparently by a media frenzy over the implementation of Colorado’s new legal cannabis program on January 1st. While prices got ahead of themselves, the recent sharp correction has created more reasonable entries in many stocks. My read is that investors should get used to volatility in the sector and anticipate a series of similar surges as the year progresses, with the Washington state legal cannabis implementation, which will likely be in June, the November elections and perhaps some additional unanticipated events serving as key catalysts.

The proverbial genie is out of the bottle. The bull case for the sector is clear and compelling. Quite simply, a triple-win for society is in its early stages: Consumers and patients will get what they want or need at higher levels of quality and lower prices, governmental entities will get much needed tax revenues and cost savings from eliminating wasteful law enforcement and incarceration expenses, and entrepreneurs will create tremendous wealth for themselves and their investors.

I am not here today to plead the bullish case in detail, but I have embraced it after months of study, including conversations with industry leaders, private investors and public-company executives. The early 2013 bubble in the publicly-traded cannabis stocks attracted my attention, and, after careful study, I was able to confidently launch in September an internet-based community of investors focused on “capitalizing on cannabis.” 

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