One thing 2013 has taught cannabis investors is that not all pot stocks are the same. At 420 Investor, one of our goals is to separate the proverbial flower from the stem as we identify the companies that have potential and get prepared for new entrants that show promise while avoiding those companies that will likely never succeed. As we enter the final few months of the year and begin to think about 2014, there are two big trends that I think will be important, including the rollout of legalization in CO and WA as well as the rapidly growing awareness of the potential of cannabidiol (CBD). As I look at the current universe that I am tracking, three names jump out as being the most leveraged to these trends.
First up is mCig (MCIG), which is about to launch its $10 vape-pen. I think that the CEO has a great plan to build a brand, and I like his ethical approach. Some of our subscribers expressed some reservations in our "Toking Tuesday" chat last week, but I think it's important to consider that the product will likely appeal to many first-time users or those who haven't smoked pot in decades but are returning now that it's legal. Also, keep in mind that this is just a first-generation product, and MCIG is already working on a next-generation pen. While there is always a risk that the product doesn't succeed, I think the timing of the launch is perfect, just as recreational cannabis becomes legal in two states. I see MCIG as very likely to appeal to current smokers but especially to baby-boomers. To learn more about MCIG, I suggest that you review the interview I conducted with CEO Rosenberg earlier this month.
Next up is Medical Marijuana, Inc. (MJNA), which is the only company able to ship CBD to anyone in the U.S. While I continue to harbor some concerns about the company and its affiliate, CannaVest (CANV), things are lining up for MJNA following Gupta's reversal in August. For those not following closely, the company has corrected a big problem and is now forging ahead rapidly. Previously, it was relying on its Red Dice Holdings joint venture with Dixie Elixirs, but it has created new products through CannaVest and its own marketing team (HempMedsPX). The company is getting the word out and making sales (even to me!). They just hired Cheryl Shuman as a spokesperson too. While I don't expect Q3 results in November to be particularly strong, I am expecting real traction in Q4. MJNA doesn't have a permanent advantage, in my view, but it has a huge head start over any potential competition, and I think that it will be capitalizing on this head-start in the coming months.
Finally, GrowLife (PHOT), which just posted an updated investor presentation this week, should see a surge in business in 2014 and beyond. I think that this is a "picks and shovels" play and that investors fail to appreciate that the company, through its online and bricks-and-mortar stores, sells a lot more than equipment. The best way to think about PHOT in my view is that they benefit from the trends in both recreational and medical marijuana. In case you missed our webinar with marijuana policy expert John Davis, who is on the Board of NCIA and CEO of the Northwest Patient Resource Center in Washington (which will be acquired by Diego Pellicer), 'The Imminent Collapse of Cannabis Prohibition', it's pretty clear that the marijuana industry will be highly fragmented for years to come. This means lots of growers, which should be good for PHOT, which will benefit as production shifts from Canada, Mexico and Northern California. If Growlife is able to be dominant in the regions that are producing legal medicinal or recreational cannabis, then it likely stands to do very well.
So, these are the companies which seem most leveraged right now to benefit from the trends I think are important and to capture investor interest. I am not necessarily saying that one should blindly invest in these companies, as the entire sector is somewhat expensive and ahead of fundamentals due to such high demand for the stocks. For my current view on these stocks from a near-term trading perspective, please refer to the video I emailed earlier today where I discuss these three stocks as well as GWPH and TRTC.