High hopes

Cheech & Chong -- Marijuana
Sponsored By:

Joint Ventures — Will Wall Street Get Into Weed After Tuesday’s Vote?

There are many unanswered questions in the wake of successful ballot measures in Colorado and Washington to legalize marijuana for recreational use. As Colorado Gov. John Hickenlooper warned, residents can’t “break out the Cheetos” until the policies of drug enforcement and product distribution are worked out.

But now that marijuana is going mainstream, it’s worth asking how long it will take major corporations to get in on the act. Because you can bet wherever there are profits, there are going to be interested corporations.

And looking at the possibility of a nearly $120 billion market, you can bet big business has a case of the munchies.

One logical option would seem to be tobacco companies like Lorillard (NYSE:LO), Altria (NYS:MO) and Reynolds American (NYSE:RAI). These companies have little to no true growth potential due to the obvious negativity surrounding their cigarettes’ health effects and the harsh regulatory environment … to say nothing of the fact that they are literally slowly killing their customers. Marijuana would provide a way to growth, and existing infrastructure could easily be swapped over from tobacco to hemp with little hiccup.

Heck, the marketer in me wonders if there’s even a market for a weed-tobacco blend.

Another option, focusing specifically on the medical marijuana sphere, would be the growth of marijuana operations in Big Pharma stocks including Pfizer (NYSE:PFE), Merck (NYSE:MRK) or Eli Lilly (NYSE:LLY). For starters, simply creating a medical marijuana pill that contains the active drug of cannabis could be a big growth opportunity. After all, it’s counterintuitive to get “health benefits” from a treatment that demands you inhale irritants and carcinogens just like cigarettes.

Why not just cut out those side effects with a capsule or liquid version that gets the same medical effects?

And again, the marketer in me would push this route as a simple way to tap into reluctant markets. Changing the delivery method could help break any negative associations with bongs or smoke-filled VW buses.

This is all rampant speculation, of course. But the opportunity is starting to look very real … so it’s only a matter of time before big business gets in on the marijuana game.

But what if you’re impatient and want to buy marijuana businesses now? Unfortunately, there are few options — and the ones that exist are extremely flawed. These are not investments I advise; they are highly speculative, subject to extreme volatility and micro-cap operations that trade on the pink sheets.

But if you’re interested, Medical Marijuana Inc. (PINK:MJNA) trades for 11 cents currently and has a paltry $77 million market cap. Cannabis Science (PINK:CBIS) is even smaller at 9 cents and $62 million.

I would highly recommend avoiding these picks, since unscrupulous pump-and-dump artists can easily have their way with these picks. I know the allure of getting rich in penny stocks is high, but the risk of going bankrupt is also very real.

Related Reading

Jeff Reeves is the editor of InvestorPlace.com and the author of “The Frugal Investor’s Guide to Finding Great Stocks.” Write him at editor@investorplace.com or follow him on Twitter via @JeffReevesIP. As of this writing, he did not own a position in any of the stocks named here.

Get The Slant delivered to your inbox every day!