While most pot stock investors are betting big on future gains, volatility in the sector is showing signs of a marijuana stock bubble on the horizon. Heavy stock promotions, price pump gimmicks, and questionable acquisitions have caused a rift in the market, with analysts split on the future of cannabis stocks, even as legalizations looms on the horizon. One thing that is for certain, however, is that an influx of capital from big tobacco, pharma, and alcohol, is bound to follow any major push for prohibition repeal.
While it remains to be seen whether or not small-time investors can cash in on the marijuana stock craze, considerable winners and losers will emerge in the sector. Here are four companies that have a better than average chance of winning the marijuana stock market:
Many analysts believe that it is just a matter of time before the tobacco industry moves into the marijuana stock sector. According to some reports, that time may be now. As cigarette smoking declines, big tobacco has pushed e-cigarettes, and now they are pushing marijuana since it is clear big money is at stake.
Philip Morris’s (NYSE:PM) investment in Syqe Medical was the second largest investment in the marijuana space this year, and the company now owns a patent for a GMO strain with high terpenes. Whether marijuana can rekindle the sagging fortunes of this tobacco giant is an open question, but Philip Morris is about to give it their best shot.
Like Philip Morris, Altria Group (NYSE:MO) is one of the kings of big tobacco, controlling over half of all cigarette sales in the United States. They have not shown any outward signs of entering the cannabis market, but it is a logical bet they are considering it. Many investors think they are bound to make a move, and in a big way.
"Vaping is one of the fastest-growing segments in both nicotine and cannabis," Cowen analyst Vivien Azer said in 2016. "Upon federal legalization, big tobacco could leverage its expertise to explore the legal cannabis market through vapor."
Big pharma is the next established industry likely to make major inroads in the cannabis space. Insys Therapeutics (NASDAQ:INSY) has a synthetic THC-based drug approved by the FDA in the United States called Sydros which is meant to treat patients with seizures. The company looks set to invest some of its significant cash-in-hand— a reported $236 million at the end of 2016 —into the research and development of cannabis-based drugs.
GW Pharmaceuticals, plc (NASDAQ:GWPH) is one of the biggest firms entering the cannabis space, with a $3 billion valuation. The company’s experimental new drug Epidiolex, used to treat childhood epilepsy, could be the first marijuana-based epilepsy drug to get federal approval in the United States.
Although the childhood epilepsy market may appear small, millions of people, both children, and adults suffer from the disease of epilepsy, and this drug positions GW to expand into the adult market.
While some question GW’s motives in moving into the CBD sector, the company stated that their goal is to offer a pharmaceutical alternative simply. “We’re not looking to impact the availability of other products on the market,” GW executive Steve Schultz said in an interview. “Our goal is to provide an additional option for patients and physicians who desire a purified version of CBD for treatment of seizures.”