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Why Companies Are Investing Big in the Marijuana Industry

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The marijuana industry has been undergoing a massive overhaul in recent years. Once a shadowy business occurring on street corners, marijuana legalization in certain U.S. states and widely available information on its medicinal qualities have brought cannabis into the daylight – and to the attention of potential investors. Now that marijuana’s image and legal status are evolving, its potential for lucrative investment is growing rapidly.

No matter what your moral opinion of medicinal or recreational marijuana may be, it’s helpful to understand why we’re poised for a “green rush” – as well as how to take advantage of it as an investor. Here are some reasons that companies are investing in the marijuana industry, and strategies on how to get involved.

It’s not as legally dangerous as it used to be.

Since marijuana has been classified as a Schedule I drug, its legal status has discouraged many companies from investing in the industry. However, now that legalization is starting to sweep the nation, cannabis’s legal prospects look promising enough to warrant financial investment.

It’s important to understand marijuana’s legal status when considering whether or not it’s a viable investment. Twenty-six U.S. states have laws legalizing marijuana in some form, and seven states (plus the District of Columbia) have adopted expansive legislation legalizing recreational use. However, marijuana is still prohibited by the federal government, which means that although in-state cannabis companies are legal on the state level, businesses are not federally legalized to sell it in any form.

Because of this and the fact that public companies are interstate, it can be difficult to safely invest in cannabis companies at the present moment. However, the legal environment is starting to turn favorably towards this potential.

Despite the fact that marijuana is illegal on the federal level, the fact that so many states currently have lifted the prohibition and many more are looking towards doing so makes it politically inviable to continue the federal prohibition for much longer. In fact, many political analysts believe that despite the current federal administration’s supposed hard stance against cannabis usage, it’s highly unlikely to interfere in the legalization happening on the state level.

This is all to say that cannabis’s future legalization is looking good, so many companies feel comfortable enough with its progress to start investing. If you’re considering it, you can take a page out of Joe Kennedy’s book in the 1930s; he amassed a stock position in alcohol during prohibition, and made a fortune once it was re-legalized.

Public opinion is shifting.

Along with legalization creating more opportunities for investors, changing public opinion regarding marijuana is also attracting investors to the industry. In fact, 60% of Americans now support making cannabis commercially available, and 89% of the country approves of medicinal marijuana.

This shift in opinion is largely due to the increasing availability of information about the drug. Widespread news coverage about its medicinal benefits, including treating epileptic seizures, mental illness, and side effects from chemotherapy have all made the public view it as more of a treatment than a vice. Furthermore, the fact that it has few harmful side effects, people can’t overdose on it, and since it’s not chemically addictive it has caused many to consider it equal to alcohol in terms of danger.

Because of this shift, the marijuana industry is becoming a safer bet in terms of branding. Instead of the “devil’s lettuce” that it used to be, cannabis has developed into an industry that’s relatively safe – at least in the court of public opinion – for companies to align themselves with.

There’s potential to make a lot of money.

Perhaps most importantly, investing in the marijuana industry can be extremely lucrative. Cannabis sales increased by 30% in 2016, with marijuana-related revenue amounting to about $6.7 billion. Even better, sales are expected to triple in the next four years, and marijuana stocks have soared – including one with gains of 2,000%.

Obviously, this is a tempting market to get into, which is why so many companies are taking advantage of the economic potential of the industry. However, it’s important to be careful. Many cannabis companies trading in the market can be difficult to value because they aren’t well-established and they can have a difficult time accessing funding from banks due to their tentative legality.

To avoid any issues and still take advantage of the money there is to be made, many companies are instead investing in businesses with no marijuana-related products but that will likely benefit from the cannabis industry. For instance, Scotts Miracle-Gro has acquired several leaders in hydroponics (a preferred method of growing marijuana) and is the main supplier for indoor cannabis growers, allowing it to tap into marijuana’s monetary potential without the associated risks.

Due to shifting opinions, increasing legality, and economic potential of the marijuana industry, it’s quickly becoming the newest moneymaker on the investment stage.

Savvy companies are getting on board the green train – will you be next?

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