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In 2016, sales of marijuana and marijuana related products surged to almost $7 billion. If that seems like a lot, it’s only just beginning. At this point, almost 30 states have some sort of legalization or decriminalization which shouldn’t be surprising regardless of your views. The continuation of this process is inevitable. As states see not only the progress but the profit from taxes that states such as California are making, all states will push for legalization of the green plant.

In 2014, marijuana sales in the U.S. topped out at around $2.7 billion, with half of that coming from California’s medical marijuana industry. Today, California alone is expected to hit $5 billion in its medical marijuana market once regulations are all ironed out. For scale, the Los Angeles market is alone worth more than $1 billion dollars (the same revenue as Colorado pulled in last year).

By the year 2024, marijuana sales are projected to reach almost $21 billion dollars and some estimations suggesting a much higher number for the whole of the marijuana industry in the U.S. of $50 billion by 2026.

From all these numbers, it is clear that we are still in the very early stages of legalization. The volume of startups involved in the industry is reaching an all time high with most of the companies springing up in the last 5 years.

The market for marijuana does not just include selling weed in a sketchy storefront. The market includes pharmaceuticals made by some of the largest pharma companies in the world, a range of companies devoted solely to edible forms of the plant, satellite companies dedicated to the transportation of money for dispensaries, security companies and every other possibility. The options are endless, and the market will continue to grow as long as there is a place for it.

With the continuation of legalization and decriminalization across the country, the push for this industry is now inevitable.

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Let’s give the example that someone has had a marijuana business for a few years and decides they are ready to sell. The immediate response should at that point be, how much is the company worth? This has been a large issue in the marijunana market as mergers and acquisitions are on the rise.

Valuations can fluctuate rapidly given location, cash flow, local/state regulations, and how well the company has maintained business records.

There are many factors that need to be taken into account to assess proper value which means that each situation is undeniably different. The three main tools that have been longstanding financial estimators are seen as the: companies assets, income and market values of similar businesses. Those three factors are usually combined along with a standard valuation formula called Earnings before Interest, Taxes, Deduction and Amortization (EBITDA).

The difficulty with cannabis businesses however lies in the fact that there are such a high number of variables. Therefore it has to be a combination of many methods to determine the value of a business as opposed to the traditional business that could use just one.

One rule of thumb with marijuana businesses states that the valuation of MJ companies can be often worth around six to eight times their EBITDA. But once again, that method should not be utilized solely as there are so many changing variables.

In the state of California, San Diego-based Greenlife Business assists MJ company owners who are looking to sell. The CEO of Greenlife, Andrew Matthews states that in California because there is still no state regulatory system, the largest value is in companies that have already been awarded local permits. Matthews stated “I’ve never seen a city-licensed dispensary (in California) sell for under $1 million, regardless of the numbers. It could be losing money every day, and people will buy it for millions.”

When evaluating a company for its purchase, buyers and sellers need to consider all the factors involved before making an educated offer.

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The market in Nevada for recreational marijuana has made it so price hikes are common and as a result are hurting the state’s medical MJ industry.

The price of medical marijuana in some parts of Nevada “has almost doubled”, according to KTNV TV station. This raises concerns about unaffordable medical cannabis which may force desperate patients to turn to the black market.

An MMJ patient named Emily Wilson says that she knows several patients who have stopped relying on dispensaries and have turned to the black market because of higher medicinal cannabis prices. The general manager of Las Vegas dispensary ‘ReLeaf’ admits to the fact that she has seen a “decrease” in MMJ business according to KTNV TV.

Several Nevada dispensaries are attempting to curb this by incentivizing customers to stay away from the black market with benefits such as letting them go to the front of retail lines as well as making sure products that patients are reliant on are always well stocked.

According to research done by a wholesale marijuana pricing data company named Cannabis Benchmarks, the average price in Nevada for a pound of wholesale marijuana went up almost $400 in the first week of July (right after the recreational market was up and running).

The price hikes are said to be the result of a shortage of inventory caused by the unexpected high volume and popularity of Nevada’s early start rec program. To get the adult-use program off the ground by July 1, retailers had to sell their remaining product from their MMJ inventory in order to get ready for the new regulations.

All of this leads customers to a difficult choice between money and legality. If patients choose to use the black market, it almost defeats the purpose of legalization. Should the government have regulation on the prices of marijuana, or should legalization occur quicker so natural competition can bring prices to an equilibrium?

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Vermont expanded its medical marijuana program after Governor Phillip Scott signed legislation that adds Crohn’s Disease, Parkinson’s Disease, and Post-Traumatic Stress Disorder (PTSD) to the list of qualifying conditions for the state’s legal market.

While it would have been great if Governor Scott signed the recreational cannabis legislation earlier this year, we are favorable on this development. Analysts have said that Vermont’s legal recreational and medical cannabis market could surpass $100 million.

Legislation to Significantly Expand the State’s Cannabis Market

Vermont has a small medical cannabis program and this development should significantly expand the size of the market. The state only has four medical cannabis dispensary licenses which serve less than 5,000 registered patients.

Current law allows patients to only do one or the other, not both. The legislation also allows dispensaries to operate as a for-profit entity (currently required to operate as a non-profit).

If the legislation was approved, beginning in July 2018, it would legalize the possession of up to an ounce of weed, two mature plants and four immature plants.

Governor Rejects Recreational Marijuana Legislation

Earlier this year, both the Vermont House and Senate passed legislation to legalize recreational cannabis. Although the legislation was vetoed by the governor, he indicated his support if certain conditions were addressed.

According to local news outlets, Governor Scott said, “I’m not philosophically opposed to ending the prohibition on marijuana.”

The legislation would have worked to satisfy some but not all the conditions. The legislation would have created a study commission to look at other state models from a taxation and regulation standpoint. This study would be used to make recommendations for Vermont’s adult use market and would provide guidance regarding other state markets.

A Development to Watch

While we are favorable on this development, it will take time for Vermont’s market to grow to a size where it is attractive from an investment standpoint. We continue to view the Vermont market as attractive from a geographic standpoint due to the proximity to Massachusetts and New York, however, we prefer other markets.

There are only a few companies focused on the Vermont market and we will continue to monitor how the state’s cannabis market advances from here.

Authored by: Jason Spatafora

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With a huge push in the last few years for marijuana’s legalization, the industry has never been this high (no pun intended). Since election day in 2016, various states across the U.S. have pushed for legalization for medical and recreational cannabis, leading to the growth of industries doing everything from pharmaceuticals to cash transport and all in between.

The large wave of legalization that took place across the country on election day left many with mostly speculative ideas about where the industry could go, but since the first IPO for cannabis, many have taken the dive into the budding market.

Currently, there are 21 states plus Washington, D.C., that allow the sale of some form of marijuana weather that be medicinal or recreational. This has made for a new market of ancillary companies dedicated to all things related to the industry. With an expected growth from $1.5 billion to almost $4 billion by 2018, the market continues to attract new companies with hopes of breaking in to the current boom we’re seeing.

The industry has stayed at the forefront of trading topics since the first IPO was announced as any smart investor would jump at the prospect of a huge industry on the horizon. With product suppliers, marijuana retailers, dispensaries and more, the need for lawyers, accountants and security consultants becomes extremely relevant. Marijuana has taken over a large part of the market with buzz being generated daily and new highs being hit. Not only is there incredible opportunity for the investment market, but in the ancillary businesses as well.

With no rules or guidelines as to how this market will grow, the possibilities remain unlimited as projections skyrocket for the coming years. It’s no wonder that marijuana has at the top of the trading topics and hype for almost 2 years. Although the federal government still classifies the drug as a schedule 1 narcotic, the hopes that the scheduling will change are slowly coming to fruition. With more and more states pushing for legislation to legalize the plant as well as recreational and medical industries booming, it looks as though the marijuana market is here to stay.

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The profit gained from investing in marijuana stocks can be enticing, but as any other industry is, it can be quite risky. The current federal administration headed by Trump could effectively try to force anti-marijuana laws into states that have legalized the plant. Falling prices due in part to the commoditization of cannabis also concerns the industry. One of the largest players in the industry (Canadian marijuana market) faces potential failure in its efforts for national legalization of recreational marijuana.

So, with all this information, is there a safe way to make money from the marijuana industry? CNBC’s Jim Cramer has suggested an alternative. His suggestion is to buy shares of Brink’s Company (NYSE: BCO). Is this one stock really the least risky way to invest?

Why Brink’s? Brink’s is the number one provider of services for transporting cash securely. Brink’s trucks are synonymous with armored transportation of money and valuables. In addition, the marijuana industry is almost entirely run on cash.

The reason marijuana related companies cannot deal in anything but cash goes back to a 1970 federal law known as the Bank Secrecy Act. This piece of legislation stated that all financial institutions regularly monitor their customers’ accounts for various forms of potential criminal activity. Banks are also prohibited from doing business with customers who engage in criminal activities. Because marijuana is still federally illegal, banks cannot do business with companies that have any part in the industry.

Brink’s is not a financial institution, so therefore it can deal with marijuana-related businesses without any of the worries that banks face. Brink’s can provide both money transportation as well as vault services— just what these companies need.

Brink’s stock has followed a similar uptrend to the marijuana stock curve over the last 12 months with its shares soaring nearly 140% since July of 2016. Now one could say that this has nothing to do with the soaring of the marijuana industry itself, but it is a strong coincidence worth researching.

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Stocks in the medical marijuana industry have been hitting new highs for almost a year at this point, and the reasons behind it are quite obvious.

To say the least, legal marijuana sales have grown exponentially as states across the U.S. continue to legalize the plant. A report from Marijuana Business Daily titled “Marijuana Business Factbook 2017” stated that sales from legal cannabis could grow by half in 2018, and almost triple from 2016-2021 to an industry worth more than $17 billion. That information alone is enough to bring investors to the table for marijuana’s long term gains.

Another reason behind the industry’s quick rise to fame is the equally quick-changing opinion on marijuana. As the public research the plant more, its medicinal effects outweigh the old stigma’s that cannabis has. A poll from Gallup that has been running for over five decades found that 60% of those surveyed in 2016 wanted to see recreational marijuana legalized nationally. This is compared to only 25% in 1995.

This expansion is across the board as we also see many short-term plans to expand the industry within North America itself. A few months ago, Mexican President Enrique Pena Nieto signed legislation making medical cannabis legal throughout the country while Canada’s parliament is currently doing the same for recreational marijuana.

All of this leads to great business for marijuana investors and companies, but how does it relate to the consumer? In Canada, the average price for a gram of marijuana increased almost 12% to $6.23, while some averages across the country are all most 20% higher. In other words, companies are passing on taxes and costs to the consumer in an effort to reach higher profits and lower costs. This is not all bad as this leads to a more open market where prices are balanced out by competition. Researchers expect the price to fall as more companies enter the space and capitalism weighs in.

We can’t deny that legal marijuana is a great investment opportunity given all of the figures displaying high industry growth rates. However, there are some clear-cut concerns which leave investors high expectations to not translate into big profits. Until we know what will happen with the industry, make sure to do the research and leave expectations at the door.

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Towards the end of June, the S&P 500 had been up almost 20% over the course of 12 months. With a historical rise on average of around 7% annually, the new average is something investors are excited about. If this looks like solid gains than you’re right, but take a look at the gains for the marijuana industry and you’ll be ecstatic. In some instances this industry has doubled or even tripled its value over the past 12 months.

Why are these stocks doing so well? One of the main reasons behind it is the rapidly changing public opinion on the plant. With more research than ever being conducted, the public is learning the truth behind marijuana’s health benefits. A 2016 poll from Gallup showed that favorability toward the legalization of marijuana hit an all time high of over 60%. As opinions get better, so do sales. Investors project the sales from U.S. legal marijuana will top $6.9 billion in 2016 and are expected to more than triple by 2021. All of this leads to a bright future for cannabis related investments.

Marijuana stocks are more profitable than ever as sales continue to grow. This does not mean one should forgo their usual research, if anything one should be extra careful because it is a new industry. That said, this is the time to diversify a portfolio to get some green with some green. Here’s four stock picks that should see profit this year.

1. Aphria
This is one of many Canadian medical marijuana producers and retailers as the Canadian marijuana industry has been around for much longer than its U.S. counterpart (legally that is).

Aphria (NASDAQOTH: APHQF) has been profitable for investors for an astounding five consecutive quarters. A new project is seeing the company enlarging its growing capacity to a 1 million square feet to help produce an estimated 75,000 kilograms of cannabis per year.

2. Canopy Growth Corp.
Yet another Canadian marijuana stock; this company currently has the highest market cap. Canopy Growth Corp. (NASDAQOTH: TWMJF) is on track to be profitable for this year. This company has benefitted from exporting some of its production overseas in places where cannabis is legal medically.

Canopy Growth also acquired Mettrum Health (which boosted its customer reach within Canada). In addition, they recently purchased 472,000 sq. ft. for its headquarters to expand grow capacity.

3. MedReleaf
This is another profitable stock called MedRelead (NASDAQOTH: MEDFF) (TSX:LEAF), which was the largest North American IPO to date. MedReleaf, like Aphria and Canopy Growth is a producer of medical cannabis for Canadian patients. The company recently raised over $74 million dollars from its IPO to fund its expansion in a facility located in Bradford, Ontario. Once the new facility is completed, MedReleaf says it will be capable of 35,000 kilograms of annual cannabis production.

4.Scotts Miracle-Gro
This emerging marijuana stock Scotts Miracle-Gro (NYSE: SMG) is expected to generate high profits for the 2017 fiscal year. The majority of Scotts’ business comes from various traditional lawn and garden care products. The other portion of business comes from hydroponics. As the traditional part of Scotts’ sees various ups and downs according to weather etc., their hydroponics section is growing very quickly up 17% from last year.

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A new decision by a major bank could present trouble in the near future marijuana stocks.

PNC Financial Services (NYSE: PNC) is shutting down its bank accounts for one of the largest advocacy groups for cannabis legalization. The group, appropriately named ‘The Marijuana Policy Project’ (MPP), was informed by a PNC representative that the bank felt it was “too risky” to do business with the organization.

Could the result of this decision by PNC executives affect the marijuana industry? Yes, and it could potentially deflate marijuana stocks in the process.

A representative from PNC confirmed that it would shut down MPP’s account but refused to comment on the details of the situation. PNC did, however, state that “as a federally regulated financial institution. PNC complies with all applicable federal laws and regulations.”

The representative from PNC referred to federal laws such as the Bank Secrecy Act which was enacted in 1970 requiring financial institutions to monitor customers’ accounts for various forms of potential criminal activity. If the company is suspected to be engaging in criminal activity, banks are prohibited from doing business with that company.

Although MPP does not touch the physical marijuana plant, an audit of the organization by PNC showed that MPP received some funding from businesses that are in the physical marijuana industry. This does not necessarily mean that these companies are committing crimes, but rather the fine line between federal and state legislation means that it remains risky for anyone involved. PNC took this information and decided that it would no longer do business with MPP although the organization had been a customer of the bank since its founding in 1995.

The result of this could lead to a domino effect in the industry. If one major bank decides to take an action like this, it could only trigger other banks to follow suit. This could lead small businesses involved in marijuana to only deal with cash in order to survive which is a dangerous and inconvenient system for all. In short, this new budding industry deserves recognition by the financial industry. If the government chooses to tax these companies as they do, it is only fair that they receive bank accounts and treatment as though they are any other business.

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The company Aurora Cannabis (NASDAQOTH: ACBFF) has provided a solid platform for investing in the recent months. Shares of this canadian company are up almost 400% in the past year.

Does all this recent gain make Aurora Cannabis an intelligent buy? Here’s a few insights that investors should know before dipping their portfolio into this hot marijuana stock.

Why has this stock soared so much in the recent months? After Aurora’s initial public offering in 2014, the stock plummeted throughout the next year. Despite receiving a highly anticipated license to provide medical marijuana from the Canadian government in November 2015, its stock performance did not reflect the new information.

In the summer of last year, things started to improve for the Canadian company despite the country allowing citizens to grow their own medical marijuana. The improvement is attributed to three pieces of news which generated excitement amongst potential investors.

The first was the announcement that the company would be acquiring CanvasRx, which at the time was Canada’s largest medical marijuana patient outreach service. This acquisition put Aurora at a great advantage as they now had potential to reach a much larger clientele base. Second, the company received financing for net proceeds of around $23 million which the company stated it would use for expanding its operations. Lastly, Aurora’s revenue topped $1 million for the first time in company history.

Around this time, the public became more inclined to invest in marijuana stocks as the industry began to take off. This was partly due to several U.S. states legalizing cannabis recreationally and medically.

All of this is behind the opportunity for the legalization of recreational cannabis in Canada. Prime Minister Justin Trudeau has pushed incredibly hard to fulfill one of his campaign promises allowing recreational marijuana throughout the country. If his current efforts come to fruition, marijuana could be recreationally legal in Canada by July 2018.

All of these efforts provide a basis for Aurora to reach new high’s and in addition provide investors with a strong base for whether or not to add Aurora to their portfolio’s.

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