We’ve come a long way in our approach to marijuana.
Twenty-six years ago, then-presidential-candidate Bill Clinton said, “I experimented with marijuana a time or two, and I didn’t like it. I didn’t inhale it, and never tried it again.”
Today, most people don’t need to hide their “experimentation” with cannabis.
Medical marijuana is legal in 29 states – plus Washington, D.C. – and is fully legalized for recreational use in nine others.
Many people expect marijuana to be legal throughout the country in the next few years. And one day, getting a joint will be as easy as walking into a convenience store and picking up a six-pack of Budweiser.
That’s why so many investors are salivating over the ability to invest in marijuana-related companies.
It’s still an incredibly undeveloped area. There are many immature companies. And though it’s an exciting sector for speculators, it’s tough to know which companies are going to be tomorrow’s winners.
There is growing evidence that cannabinoids (chemical compounds found in marijuana) have therapeutic abilities. And because of that, it’s becoming more widely accepted by all types of people.
In my own circle, a friend who is a former world-class mixed martial artist – and doesn’t put a morsel of processed food in his body, much less a recreational drug – told me he gets significant pain relief on his arthritic knees from oils containing cannabinoids.
I also have an older cousin who, when I was 18, ratted me out to my grandmother because he heard I had an earring (he never even saw it). He wasn’t exactly “Mr. Cool”… but now he uses cannabinoid-based products for his back.
I bring this up not to conjure the image of me with an earring (I got rid of it two months later), but to show you that medical marijuana and cannabinoid-based therapies are hardly fringe.
That said, when it comes to investing, I’m looking for something a little more proven – which is not easy to find in a young industry.
That’s why my favorite “pot” stock is GW Pharmaceuticals (Nasdaq: GWPH).
I’ve followed GW Pharma for years and have met with the CEO several times. It is a biotech company focused on therapies for rare forms of epilepsy – particularly the kinds that affect kids. Some of these children have more than 100 seizures a day.
Its lead drug, Epidiolex, a cannabinoid-based product, has gone through all three phases of clinical trials and is likely to be approved by the FDA on or before June 27, when the regulatory agency is set to make its decision.
Last month, an FDA advisory committee unanimously voted in favor of approval of Epidiolex. That is not a guarantee of approval, but it is a very strong indication.
In clinical trials, Epidiolex significantly reduced the number of seizures in patients, making it easier for them to go to school, travel and live their lives.
The drug is likely to become a blockbuster and generate $1 billion in annual sales.
With a current market cap of less than $4 billion, GW Pharma is inexpensive compared with those of many other biotechs such as Biogen (Nasdaq: BIIB), Celgene (Nasdaq: CELG) and Amgen (Nasdaq: AMGN), which all trade at a little below five times sales.
The marijuana industry is about to blow wide open. There will be some gigantic winners and some spectacular losers.
A stock like GW Pharma, backed by strong science and a patient population in dire need of help, is an excellent way to invest in the sector.