Time for Marijuana?

Over the past few months we received several e-mails from readers asking about our opinion on the marijuana sector and the companies which grow, process and sell the product. Our advice has always been the same, this is a very young and dangerous sector to invest in.

And we acknowledge that we missed the ‘boom’ in the first quarter of 2014 when many marijuana related stocks doubled, tripled or more. But we’re glad we also missed the ‘bust’ during the past few weeks when those same stocks came tumbling down back to Earth.

The reason we advised people to steer away from them is because we’ve seen the same trend many times before when stocks in an emerging sector catch fire. Many investors believe it’s an opportunity of a lifetime, often aided by ‘Wall Street pros’ claiming it to be a ‘new economy’. But what we’ve learned is that it always takes time for an industry to emerge, weed out the bad actors and then prepare for a lasting, steadier growth cycle.

The Case For Marijuana

Although there is anecdotal evidence that marijuana reduces nausea and stress to cancer patients and that it works as a muscle relaxant and pain reliever, no real scientific studies involving marijuana have been passed by the FDA.

The real reason why many US states are willing to legalize the production, or decriminalize the use, of marijuana is because they have the blessing of a majority of the voters. According to a recent survey, nearly three-quarters of liberals and half of the politically conservative favor legalization.

A second, and even more obvious reason, is… money. Washington state anticipates earnings of $2 billion in five years from a 25% tax levied on producers, processors, and retailers. In Colorado, taxes and fees from the marijuana trade are expected to reach $134 million in 2014.

Of course, not all is rosy in this still controversial sector. A few weeks ago, the U. S. Treasury Department issued guidance reminding these companies it is illegal under federal law to manufacture, distribute, or dispense marijuana. Also many banks won’t process credit card payments or refuse to open checking accounts for marijuana related companies. But we’re convinced that with increasing pressure from the public, and especially the fact that large sums of money can be made, those objections will also become things of the past.

Additionally, since early March, the SEC has suspended seven marijuana-related companies citing concerns regarding the accuracy and adequacy of information in the marketplace and potentially manipulative transactions.

Cannabusiness Group (OTC: CGBI), Growlife (OTC: PHOT), Advanced Cannabis Solutions (OTC: CANN), Aventura Equities (OTC: AVNE), Citadel EFT (OTC: CDFT), Petrotech Oil and Gas (OTC: PTOG) and Fusion Pharm (OTC: FSPM) have all been brought to a halt. We believe this is a very positive event. The rotten apples have to be removed before the rest of the sector can proceed.

Conclusion

It’s clear the marijuana sector is maturing very fast. The SEC is doing its job very thoroughly by removing the ‘bad boys’. The companies that mean well and act accordingly with their filings will be the survivors.

Many issues are left to resolve, but the trend of growing and distributing marijuana is nearly impossible to stop. We’re going to look out for some good opportunities in the market. Ideas are more than welcome.

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  • Connor Kaminski

    I would like to see your analysis on the MJ stock that I am most keen on $FITX. FITX has a cult following on the WEB calling themselves Billyver’s (CEO name is Bill Chaban). With that aside they have a few more things going for them 1) They have put together an impressive board of directors ranging from previous SEC employees, Doctors and lawyers. 2) Growing in Canada where the laws are more accommodating. 3) Have 2 facilities built and awaiting approval from Canadian Gov. to start growing. 4)Very transparent in the companies activities. All seems good. Would just like to see some more input on this stock.

  • curious about everyone’s top 5 MMJ sector stock…

  • My fav’s or what I believe in my portfolio that will do well,,,,HMM my top 5_ ERBB, DIRVF, REFG,TRTC <although I was hesitant on TRTC but it think they have legs)
    and last I guess a split between AEGY wgicg is supposed supply electricity which anyone who's grow pot successefully will tell you the lights and the PhotoTronj (Back in the day PhotTron was the thing to get only it Jacked your electric bill and my buddy had 10 PhotoTrns and 2nd time posting this bc curious what ppl value ERBB share price at? (future tho) Can ERBB hit $1.00 ?? where will it settle..like Medbox was $93 a share just not that long ago but has evened out and it hovers all around $19 or so… (which to me is still High I'm thinking $10 is a fare share price on MDBX)what's stopping this company goes through the roof.. but you don't want a Cannivest either that goes to $210 a share because nobody will buy at that price & you have no choice but to go with whats offered or hold while keeping an open sale for as long as you can.. But CANV still made a lot of ppl $$$. Dude on news woulda been billionaire if he could have sold at $210. He made tons(millions)anyway but the volume this ERBB does some days? crazy, one day last week I saw 18mil volume, Sct.Trd. shows about 50mil volume daily and the next day it was flooded with 183 million in volume which since then its been a crazy coaster but mostly up ..ok they weren't doing great before Throwing their hat in the MMJ stock sector and they have a bunch that does ok, "Yo! Credit Card, Jurassic 02 Grow System, One Bode" & also had other spin offs,, been around a long time,, and I think they chose the rite direction and board and have balls and brains and i like that and doing ok all around..i know they Now I know some bashers are gonna point out every flaw my drunken ass has made.. oh ya, bit hammered.. those Jack and Coke's man,,, anyway go ahead and throw your poo at me bas but I just get my answer either way.. They have SEC ex lawyers which I found out is why they rarely put out press releases (pr) and if you notice when they do its extremely lean and carefully word it.,., (SEC shook sector and got nada) there's a few bad one's in every bunch just Pinks have way more…. Way, way more.. plus its just a blind gamble of who you believe, if u think the company is sound and of course $ and their potential to make some and how much for how long… its like Business Evaluation&iLuvThat, What do you think the price will be ??? state your est price per share ??? so curious…

  • Thank you for writing this piece…In regards to to suspensions of stocks by the SEC, there have been many other firms from many other industries who have also had the same thing happen…it would be wrong to say that this happens frequently, but the SEC suspends trading on hundreds of companies every year and has for years…due to the connotation and stigma that exists in this industry, media chooses to highlight the negative impacts and moments…at this point, it hard to say the FDA is a credible source for research…they approved the use and sale of fentanyl, which is a known killer…the FDA released it to those with mature stages of cancer…only 5% of the people prescribed the medication fall into that bracket…it created a 100 million dollar market overnight…that a that matters to the FDA and Wall Street…the cannabis industry was not the cause if the financial collapse, but it could be the economic engine that changes our economy…this industry prides itself on the people, not the profit…

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