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Community Blog / Seeing Green: Investors Eye the Legalized Marijuana Industry

Past and present, investors always have been looking to cash in on the next big thing. In 1849, prospectors flocked west for the California Gold Rush. Today, investors are flocking towards the legalized marijuana industry, which is being referred to as the “green rush.”

Like the Gold Rush over a century prior, prudent investors and advantageous business folks are scrambling to claim a stake in the potential financial earnings of the green rush. This burgeoning industry is off to a lucrative start; with medical marijuana legal in 20 states and pending legislation in 13 others, it’s already a $1.5 billion industry. And growth is fast and imminent—in the next three years, annual earnings are expected to triple.

The legalized marijuana industry is unprecedented, controversial and unlike any other industry and offers unique investment opportunities.

“The opportunities are endless, but we feel the safest are around the ancillary products that will support the industry, such as security and surveillance, software, equipment, product testing and financial services,” says David Friedman, the owner, founder and publisher of MMJ Investor News, the first news source dedicated exclusively to the investment opportunities and landscape around the legal marijuana business.

Opportunities are plenty, but striking it rich requires vision, as well as the right timing.

“Short term, I believe that most sophisticated investors and institutional funds are going to sit it out for another year or so because of both the legal and moral hazards. That creates a lot of opportunity for the retail investor to get in, but it is difficult to know how and where to invest,” he adds.

Still, like any investment, risk is inherent and especially when certain aspects of marijuana are strictly prohibited.

“We feel the risks are highest in the cultivation and dispensing of the product, since that is still illegal under federal law. Of course, the legality of the product on a federal level is a risk factor of sorts across the entire sector, but much less so if you are only supplying services to the industry, such as software or security,” adds Friedman.

Big risks can come with big rewards, but don’t risk getting duped. Friedman also cautions potential investors about scams and poor investments, particularly when it comes to investing in stocks.

“Almost all the publically traded stocks are OTC, pink sheet or BB listings that require very little regulatory oversight. None did an IPO; they are all reverse mergers into public shell corporations which is a classic characteristic of pump-and-dump penny stock scams,” he warns.

While many investors are antsy to get a piece of this pot pie, gains may not be immediate.

“Long term, the sophisticated and institutional investor will become a player in this space. Two to three years max, in my opinion, and at that point there will be the real green rush, where valuations will soar as they all compete to get into the space and early investors can exit with healthy profits,” he adds.

Still, the controversy behind this movement can’t be ignored. Legalized marijuana remains controversial, but it’s gaining acceptance in mainstream America. According to a 2014 CBS News Poll, 51 percent of Americans think weed should be legalized, while 44 percent do not. Comparatively, in 2011, 51 percent did not support legalization. The controversy behind this issue plays an integral part in the investment.

“It is keeping most of the institutional and sophisticated investors on the sidelines until it becomes less controversial, but I do believe that time will come. It could end up like the porn industry where no real serious players with high levels of credibility get involved, but I don’t think that will happen. I think marijuana is only controversial because it has been illegal, and it is now legal in 21 states (for medical use), that stigma is slowly melting away,” says Friedman.

But even with its lengthy history of political controversy and moral implications, one thing is true: money talks.

“Tax revenue generated by the industry is already projected in the tens of millions and rising as it becomes legal recreationally. Some figures put the industry at $8 billion or higher by 2016, and if legalization continues at the current pace, that could grow significantly. I think the prospects of a $100 billion industry within the next decade are not only possible but probable, and that creates credibility on its face,” concludes Friedman. 

To learn more about MMJ Investor News and the legalized marijuana landscape, visit http://mmjinvestornews.com.

 

Posted by Adam Fridman
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