November 4, 2010

SmartMoney.com Talks Investing in Pot Stocks

"SmartMoney.com does a piece on Marijuana stocks. Unfortunately you'll notice if you bother to look up the quotes on stocks like Cannabis Science (CBIS) or Medical Marijuana (MJNA), you'll see their stocks plummeted when the initiative to legalize marijuana failed. Oh well, it's the best time to buy maybe." - Baked Life


Personal opinions about the wisdom or morality of marijuana use aside, the business of legal pot is big, and getting bigger. Fourteen states now make the drug available for medicinal use, with more expected to legalize in the near future. And on Tuesday, California voters will decide whether to legalize personal pot use. For investors, opportunities are beginning to sprout.

The legal marijuana business generates an estimated $1 billion in annual revenue in California alone, according to California NORML, a pro-legalization group. There are more than 700 licensed medical marijuana dispensaries in Colorado — about one for every 7,000 residents — and another 200 or so in California. Maine and New Mexico also have a few licensed dispensaries each, and another seven states and Washington, D.C., are in preliminary stages of legalization. For insiders, the profit potential looks sky-high. “I was part of the dot-com boom, and this is the next one,” says Troy Dayton, chief executive of the ArcView Group, a marijuana business consulting firm.

In other words, the business is no longer a hook-up from your brother’s friend Floyd. Last month, a Harvard professor, a Rhode Island State Senator, and a crowd of interested entrepreneurs gathered at the Marijuana Conference, at a midtown New York City Hilton, to explore business and investment possibilities for the growing industry. Attendees wore suits, possibly khakis, but no tie-dye. The month before, HempCon 2010, an annual trade show for the medical marijuana industry, was heavily attended – by lawyers, doctors and insurance companies, says Jerome Handley, an Oakland-based attorney who specializes in cannabis business law. “It wasn’t the type of show that you would see ten years ago, with music and hippies and dancing. It was all people selling something.”

Handley may sound nostalgic, but he’s also benefited from the growing professionalization of marijuana production and distribution, and the services that support it. Helping medical marijuana dispensaries incorporate and file their taxes got him through the recession, he says, when his estate planning, trust and probate business dried up. And he’s just one of a host of professional service providers and other ancillary businesses that are scrambling to serve this growing market. “This is going to be the fifth largest business in America, and the leading positions are being staked out now,” says Steve DeAngelo, the executive director of Harborside Health Center, an Oakland medical marijuana dispensary.

So far, the intrepid pioneers have been mainly small business owners. Most dispensaries are financed by their owners or by family or friends willing to serve as angel investors, DeAngelo says. And while hedge funds and private equity funds are investing in ancillary businesses and even sniffing around direct investment in dispensaries, the day when mutual funds will invest in pot is still about five years off, he says. Until then, here are three possible ways to invest in the budding marijuana boom:

Read more: Marijuana: A Half-Baked Investment Idea? - Investing - Stocks - SmartMoney.com http://www.smartmoney.com/investing/stocks/marijuana-a-half-baked-investment-idea/





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