Source: Seeking Alpha Mar. 31, 2014 8:35 AM ET


  • The medical marijuana industry in the United States will continue to grow at a rapid rate, creating big revenue opportunities for marijuana companies.
  • Well-established companies with strong fundamentals and proven business expertise will best capitalize on this trend. Smaller companies may survive, but most will be pushed out or forced into niche submarkets.
  • Many marijuana stock prices are experiencing substantial volatility, mostly from speculative and novice investors that are blurring their intrinsic value.
  • Investors should avoid trying to time short-term swings and recognize that now is the time to invest long in stronger companies.
  • Media hype is dying down, and investors should start focusing on quantitative fundamental analysis to determine which companies are in the proper position to capitalize on a Green America.

Marijuana companies are the future. Public sentiment on marijuana is relaxing. Medical marijuana is legal in 20 states, with legislation in the works for 13 others. It has become a $1.5 billion a year industry, with expectations to triple within a few years. Colorado and Washington are essentially test cases for the Federal Government, and they are passing with flying colors.

While full legalization and taxation on the same level as alcohol may be a stretch in the short term, decriminalization and a federal green light for medical marijuana show strong signs of happening.

The medical marijuana industry in the United States is going to come hard and fast, possibly with high regulatory entry barriers, at least for startup US companies. The companies that are going to be able to seize the profit opportunities are the already well-established companies with strong financials and substantial business experience. They will be able to quickly act upon opportunities as the regulatory climate of marijuana in the United States becomes more apparent.

GW Pharmaceuticals plc (GWPH)

GWPH is the darling of the green rush. If you don’t know much about this company, read this article for a primer.

This company is way ahead of the curve in terms of position to capitalize on the green rush, and most importantly, they have substantial marijuana business experience and strong financials.

Probably most intriguing about the company is that they post consistent revenue ($44.2 million as of their year-end September 2013 annual report), which is derived from the international sales of their flagship product, Sativex. Good news about its efficacy is available (although further testing is continuing) and it currently sells in several countries such as Canada, Germany, Spain, and the United Kingdom.

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An FDA approval to sell in the US market would be a huge win for them, and information straight from the White House FAQ (which uses Sativex as an example), shows that the government has open ears for the clinical trial results. Notice the stark contrast of government sentiment between GWPH’s already well-established research progress and the red tape of US startup research cited in the Washington Post article above.

While GWPH currently has an operating loss, investors should take note that the vast majority of expenses are related to R&D of new products that are currently in the testing phase. This company really has the ball rolling, and while they might hit some clinical dead ends (like with any biotech company), a few more successful products means even more revenue on top of their already tried-and-true flagship medication. Here is their most updated cannabinoid pipeline. Below is an abridged graphical version:

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