Jeff Chiu, AP
The medical marijuana movement is the strongest it's ever been, with successful decriminalization in several states and strong progress in dozens of others.

With these changes has come greater public awareness of just how huge the medical marijuana business really is. In fact, it's so big that if the crop were grouped with other big-time agribusinesses, it would easily be the most valuable cash crop in the country -- worth more than corn and wheat combined.

With the cultivation and ongoing decriminalization of pot come new -- and legal! -- ways to invest in the trend.

But before you try to cash in on the ultimate cash crop, there are a few things you need to know.

Growing like a Weed

Over the past few decades (think back to the Reagan anti-drug days), cannabis has come out of the basement and all the way into the Oval Office. As the country has gained substantial momentum on other social issues, such as gay marriage, there is an enormous force behind legitimizing marijuana once and for all.

Supporters include an increasing number of politicians, such as Rep. Dana Rohrabacher (R-Calif.), who is pressing Washington to stay away from states' individual marijuana policies.

A cannabis leaf graced the cover of a recent edition of Barron's, a leading, historically conservative financial magazine, which argued in favor of legalization of marijuana, stating that "Legalizing marijuana will hurt drug lords, help cash-strapped states, and ease burdens on police and prisons."

Such arguments in favor of legalization aren't new -- many have touted these arguments for decades -- but what's important is that legalization has become a bipartisan issue. Our country is fighting a war that seemingly nobody except the alcohol and tobacco lobbies (and Michael Bloomberg) believes in.

On a macro level, this would suggest that the business of marijuana is on the brink of a full-scale breakout. So, what's an opportunistic cannabis investor to do?

Your Guide to Pot Players

Before determining whether you should invest or not, let's identify the available publicly traded players.

For what's called a "pure play," there are the companies that actually make cannabinoid products, including Cannabis Science (CBIS), and Medical Marijuana (MJNA). The former is an early-stage company that uses cannabinoids for pharmaceuticals that treat autism, cancer, HIV, and other illnesses. Medical Marijuana makes cannabinoid-based products as well, in addition to servicing the industrial hemp market (an industry that goes well beyond marijuana and pharmaceutical purposes).

These stocks, both microcaps, have had periods of strong gains. But with those gains comes extreme volatility.

If you're looking for a more established, big player in the industry, you'll find it in Medbox (MDBX). Its $400 million market cap makes it the largest company in this space. Medbox does not cultivate or sell cannabis, but it builds the machines that dispensaries use to store the drug. The automated vending machines are specifically designed for "sensitive" drugs, keeping the drugs in tight control and sanitized up until delivery to the patient. They can either be used to diffuse medicine directly to a walk-up patient (with biometric ID), or in assisted living facilities, pharmacies, and other points of distribution.

Besides being the largest player by market cap, Medbox is also one of the few market darlings.
When recently recommended the company for investors looking for a pot play, the stock shot up nearly 400 percent almost instantly.

Please Read the Warning Label Before You Inhale

Regardless of the new momentum behind decriminalization (and in some places, recreational legalization) and the equity options available to investors, it's important to recognize that pot stocks are still highly speculative.

Let's start with Medbox's meteoric rise after the MarketWatch mention.

While the run-up might make pot-related stocks even more tempting to investors, what it actually illustrates is the volatility that plagues them. Even Medbox's CEO addressed the outrageous price spike, saying that the economics of his business had not materially changed from one moment to the next. Since Medbox's rocket to more than $200 per share, the stock has settled back down to around the $26 mark.

As for Cannabis Science and Medical Marijuana, both businesses are valued under $150 million (we're talking "penny stock" territory), making their stocks particularly susceptible to market-manipulating hype.

Medical Marijuana has, in the past 12 months, traded anywhere from 2 cents per share to 50 cents If you were to have bought the stock at the beginning of the year, your position would have gained 40 percent in value. But if you had added shares to your portfolio in the last three months, you'd be down 50 percent. Similarly, Cannabis Science is down nearly 30 percent year to date.

Another check mark in the "speculation" category is that there is still strong resistance to letting these companies integrate into the mainstream business world.

President Obama originally campaigned on more progressive laws regarding the drug. But he's adopted a more conservative stance on marijuana businesses. He reappointed Michele Leonhart as head of the DEA, who has used tactics that go as far as threatening criminal prosecution of state employees for implementing dispensary regulations. According to an article in Rolling Stone about the administration's war on pot, federal prosecutors in Washington state sent a letter to Gov. Christine Gregoire "warning that state employees 'would not be immune from liability under the Controlled Substances Act.'"

In Colorado, mainstream banks like Bank of America (BAC), Chase (JPM) and Wells Fargo (WFC) are shunning business from state-licensed dispensaries out of fear of federal prosecution for crimes like money laundering.

Politics aside, on a strict financial basis, the valuations for these companies are out of whack.

Medbox trades at a trailing P/E well over 1,000. Using management's projections for fiscal 2016's EBITDA, the stock's enterprise value trades at a premium of nearly 20 times. If all stays rosy for Medbox, that's not an unheard-of premium for a high-growth company, but "rosy" is not how one would describe the state of the industry.

And then there's the regulatory risk, which is simply tremendous.

The Smoke Hasn't Cleared Yet

In short, we just don't know enough about these businesses yet to make a low-risk investment. Does this mean you shouldn't look into Medbox or Cannabis Science? Not necessarily. But investors would need to treat the position as money taken to the casino -- speculative and expendable.

As time goes on, and politicians continue to be influenced by the more than 70 percent of our nation's population who believe pot should be legal for medical purposes, the marijuana industry will be seen more and more as a "legitimate" business. For opportunistic investors, there will be some incredible investing opportunities.

Pot stocks may someday be the new 3-D printing stocks. For now, though, just chill, dude.

Motley Fool contributor Michael Lewis has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our newsletter services free for 30 days.

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Grady West

The marijuana space has really blossomed over the past couple of years. The crazy thing is we have yet to really touch the surface of what marijuana can do for our economy. It's valued as a multi-billion dollar industry already and its still seeing turbulence by the Fed government. Since 2015 companies like have really solidified their place in this untapped industry. One company in particular which specializes in provided medical patients with the purest and top notch CBD oils. Most importantly they have an extremely strong marketing team which is also a plus.

July 09 2015 at 3:08 PM Report abuse rate up rate down Reply
Paul Robinson

I bring to you a company compared to THCZ. For those who remember THCZ it jumped from $0.02 to $0.30 in 2015. This company is currently priced below $0.10 and analysts feel it has a short term price target of $0.20+. The company offers a hemp infused energy shot compared to THCZ full hemp infused energy can.

June 08 2015 at 10:06 AM Report abuse rate up rate down Reply
Rodrick Reynolds

Investors have had multiple opportunties to capitalize on Companies that are "established" in the MJ industry like Medbox and CBIS. Obviously to an investor the higher the market cap the more attracted we are, but how about the marijuana companies that aren't as established? Their volatility is off the charts and the ability to take advantage of those potential gains is what is is crucial when trading in the Cannabis space. Don't be greedy! This battle with federal law is going to be around for years to come and companies are still finding ways to make it in the industry. Some companies in the marijuana industry are thriving without having to touch the actual plant. Companies that offer ancillary services such as secruity surveillance for the dispensaries. Because of federal laws and banks security for these dispensaries are in high demand.

March 12 2015 at 2:23 PM Report abuse rate up rate down Reply

Medbox trades at a trailing P/E well over 1,000. Using management's projections for fiscal 2016's EBITDA, the stock's enterprise value trades at a premium of nearly 20 times. If all stays rosy for Medbox, that's not an unheard-of premium for a high-growth company, but "rosy" is not how one would describe the state of the industry.

September 29 2014 at 8:00 PM Report abuse rate up rate down Reply
Norman Gates


Buy some MJNA shares, 2013 High Times Cannabis Cup award-winner for Highest CBD Concentrate in Seattle and Amsterdam, they also hold a majority stake in Red Dice Holdings that licenses the Dixie Elixirs & Edibles brand that makes the medicated truffle that Veteran and The World's 1st recreational cannabis customer Sean Azzariti purchased. Visit Medical Marijuana Inc. (OTC:MJNA) website to find out more about why they are a great public cannabis stock to invest in long-term like: US Government Patent #6630507, KannaLife Sciences, CanChew CBD Gum, US Hemp Oil, Cibaderm, Cannabis Beauty DEFINED, Cibdex, Dixie Elixirs, HempMedsPX, HempVAP and more. MJNA also has about $500k in unrealized gains from their symbiotic relationship with CannaVest (OTC:CANV) and thru HempMedsPX MJNA canvasses the country marketing to distributors and wholesalers their several product lines of legal CBD-rich products and ingredients. HempMedsPX is a MAJOR co-sponsor of the 2014 Grammy Lifetime Achievement Award recipient, Kris Kristofferson's Hemp Aide concert w/ John Trudell which will be on February 22 of this year.

January 27 2014 at 10:21 AM Report abuse rate up rate down Reply

To make it legal sounds good but there are many downsides. You cant get a job because companies drug test, plus because it will be easily available more people will use it plus it does disorient your mind. I guess if you dont want to get ahead in life it doesnt matter. Plus there are many studies showing the negative effect it has on your heart and lungs.

June 13 2013 at 4:50 AM Report abuse rate up rate down Reply

Still ignoring the Fact. Oil companies know. The Cleanest Burning Bio-Deisel fuel known to man can be derived from Cannibus. That is why they, the Pharma's, tobacco, and newly Reestablished Liquior industries Lobbied so hard to make Marijuana Illegal in the first place.

June 12 2013 at 10:37 PM Report abuse rate up rate down Reply
1 reply to ledarac's comment

How many BTUs you talking about led?

June 13 2013 at 12:13 PM Report abuse rate up rate down Reply

I, for one, do not believe anything the federal goverment says about marijuana. Here is what we need from the feds: NO STATE SHALL PROHIBIT THE INDIVIDUAL POSESSION/USE OF OR THE INDIVIDUAL CULTIVATION OF MARIJUANA. This is liberation, not legalization. The State can and will legalize.

June 12 2013 at 10:22 PM Report abuse rate up rate down Reply

A bank can not accept deposits from a pot distribution company. That is federal law. They would be considered laundering money, (not that don't love to do this) because they do. Buying the stocks would make you at risk for the same confinscation and prosicution as they do with the little people. Bankers will do fine, the rest of us will live with the threat of going to jail. Let this one go, not a great investment yet. Any bank or market that touches the money will be gone, Not them just your money, that's how it works.

June 12 2013 at 10:01 PM Report abuse rate up rate down Reply

It is time to put a new face on Federal Government.

June 12 2013 at 8:16 PM Report abuse rate up rate down Reply