Industry Press

It's Time to Invest in the Next Multibillion-Dollar Industry - Frank Curzio - Aug 1, 2014

It was the investment report I never, ever thought I'd write...

Earlier this year, several colleagues urged me to investigate the marijuana industry. At first, I thought the idea was ridiculous. I figured most any "marijuana play" would be a scam, probably run by criminals. Plus, there was an enormous amount of hype around the sector... which is always a red flag for me. I thought any time spent looking into marijuana investments would be time wasted.

Now, after researching the sector, I can tell you that it's going to be a huge opportunity for investors.

Here's why...

The opportunity in marijuana today is similar to the one at the end of Prohibition in 1933.

You see, under the National Prohibition Act of 1920, the sale and distribution of alcohol was illegal in America.

However, whiskey could still be purchased legally with a doctor's prescription. Medicinal whiskey was one of the most popular painkillers of the day.

And by 1932, public and political views on alcohol were starting to shift. Several states had started repealing the law. For example, residents in New York, Illinois, and Wisconsin voted in favor of legalizing alcohol in their states.

In 1933, alcohol was finally legalized on the federal level – mainly for the increase in tax revenue. Today, alcohol is a $200 billion-a-year market. Early investors that bought breweries, distilleries, and other alcohol-related companies made a fortune.

We're seeing a similar setup in marijuana today.

Although still illegal on the federal level, sentiment toward the drug is improving. According to a recent Gallop poll, nearly 60% of Americans believe marijuana should be fully legalized.

And several well-known figures are reversing their stance on marijuana – suggesting it has benefits to users.

For example, last year, Dr. Sanjay Gupta – a neurosurgeon who became famous as CNN's chief medical correspondent – said:

We have been terribly and systematically misled [about marijuana] for nearly 70 years in the United States, and I apologize for my own role in that.

Four years earlier, he wrote a piece for TIME Magazine titled, "Why I Would Vote No on Pot."

Dr. Gupta's change of opinion echoes an important shift in the public's view on marijuana. People aren't buying the long-standing argument that pot is a dangerous drug with no benefits.

As a result of the shift in views, states like Colorado and Washington recently approved marijuana for recreational use. States like New York and Maryland recently approved marijuana for medicinal purposes. In total, 23 states and the District of Columbia have legalized medical cannabis. And it's likely the rest will follow.

You see, most Americans want it. And state governments are realizing they can generate significant tax dollars from regulating the industry.

For example, Colorado's early tax revenues from marijuana are much higher than officials were expecting. In March, Colorado said it expects to bring in $98 million in tax revenue during the next fiscal year. That's 40% higher than the state's original estimates.

And this number could be conservative. Earlier this year, Colorado Governor John Hickenlooper revised those estimates to say the state's annual tax revenue from marijuana is expected to top $130 million. In his latest budget proposal, he predicts Colorado's marijuana market will top $1 billion in sales by 2015.

Over the next year, I expect officials in other states to take notice of Colorado's windfall and legalize marijuana. Even the most stubborn, socially conservative politicians will likely reconsider their anti-marijuana stance once they see the potential for $100 million-plus in new tax revenues.

And with more and more states legalizing marijuana, it's estimated the industry could grow from less than $2 billion today... to more than $10 billion in 2018 – a 500% increase over the next four years. But some forecasts – like the one made by the Economist, estimate the marijuana industry could soon be worth over $100 billion.

This creates a huge opportunity for early investors to get into the next multibillion-dollar industry at an early stage.

But like most early-stage growth industries, there will be plenty of phony companies trying to take advantage of this trend. Most of these penny stocks have the words "cannabis" or "marijuana" in their name. There are a lot more marijuana-related companies you shouldn't invest in than companies you should invest in.

However, there are several stocks that stand to be long-term beneficiaries as this trend unfolds... and more investable companies will pop in the years ahead as more and more states legalize marijuana. Although I was reluctant to investigate this business, it's well worth your time to learn what's going on. It's a big trend... and it will only get bigger.

Good investing,

Frank Curzio





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