- Legalized Marijuana
On January 1st Colorado became the first state to legalize recreational marijuana, and in that time stocks in companies that produce the federally banned substance have seen there stock increase dramatically.
And yes you read correctly there are actually such things as pot stocks! These companies like greengro and Cannabis are in most cases penny stocks with valuations of rarely more then $150 million and like all penny stocks fluctuate wildly. But this these "pot stocks" gained national attention as there prices went through the roof as investors rushed to buy into an industry that made $1 million dollars within one day.
Personally I find most marijuana companies as foolish investments with no real future but investing in weed does have upside. First of all the substance is being legalized for both medical and recreational use in many states (Washington is the next state after Colorado to legalize recreational marijuana) so as an industry weed has room to grow. Also as we have seen in Colorado marijuana is very profitable considering its easy enough to grow and could be sold at very high prices.
Clearly investors who buy stock in marijuana companies are betting on the fact that the substance will be legalized nationally and the company they are invested in will expand to these new markets. Unfortunately many seem to have forgotten that the weed companies they are invested in do not have the resources or the capital to expand past the area they already operate.
The reason for this is that most banks will not lend money to marijuana companies because since the substance is illegal by federal law the banks might get fined for lending money for its distribution. Hence forth weed companies are forced to conduct there business in cash which hampers there ability to expand to other states.
Also as marijuana is legalized in states throughout the country current marijuana companies will face competition from local marijuana distributors. This means that although the industry as a whole might prosper in the future it will not be dominated by large companies but rather small regional ones.
This reason coupled with the fact that all public marijuana companies have horrible evaluations and show little or no real profit turns me off to investing in marijuana. In essence marijuana is a large bubble.
If you are interested in investing into marijuana though here's a tip, instead of buying stock In marijuana distributors like Greengro invest in companies that dispense services for marijuana. These type of companies would benefit most from marijuana getting legalized throughout the country since they have the ability to borrow from banks since they do not handle the physical weed and would not have to compete with local competitors.
One such company is Medbox (MDBX) this company manufactures marijuana dispensers, basically vending machines. As marijuana gets legalized in more states Medbox can have the ability to set up more machines throughout the country. Also Medbox, unlike most other marijuana associated companies, is not a penny stock. On Friday the stock closed at $34.01 a share, with a market value on the company of $416 million.
Unfortunately just because the size of the company is larger does not mean its stock fluctuates any less then it's penny stock cousins. On Tuesday the stock was up over 65% while one Wednesday it fell 35% and fell another 20% on Friday at one point last week the company had a $1 billion dollar evaluation.
Another negative is that the company only has a little more then $4 million in revenue. So you could call this company remarkably overvalued. But as weed is legalized that number is likely to grow.
So if you are gambler and wish to gamble on marijuana invest in companies that are associated and profit from substance but do not actually handle the distribution of the substance itself. This way they don't have to deal with the federal regulations and scrutiny from the banks.
- 3D Printing
Marijuana is definitely shaping up to become a huge bubble but another far less federally scrutinized industry is all shaping up to become huge. That industry is 3D printing.
It is obvious that 3D printing is the future and companies like 3D systems corp (in which I hold stock in) and Stratasys with it's makerbot to subsidiary, have already seen national attention and have seen there market valuations swell into the billions. Unfortunately at its current state 3D printing technology is more like a novelty then a practical technology but.... As technology improves 3D printing has the ability to revolutionize the world as we know it.
Also 3D printing has made strides in recent years with Makerbot even announcing a 3D printer with a price tag of less then $2,200. This no doubt makes having a 3D printer in every house possible, what's even better about these companies is that there evaluations although trading at a premium to the market are not completely crazy.
For example 3D systems corp trades at 202x earnings, this seems like way over the market average of 15 and the S&P's current average of 17 but 3D printing technology deserves to trade at a premium. What's even more shocking, at least to me is that some 3D printing companies like 3D systems are profitable.
The fundamentals of the 3D printing industry are sound and over the next few years I'm sure that 3D printing will form a bubble but as of right now I consider 3D printing to be a great industry to get into considering the fact that the technology will only get better and as it does the market will grow translating into massive profits for these companies and investors that get in now.
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