SAN JOSE, Calif. – It’s something we say a lot here.
“Only in California.”
In this case, it was a former federal bureaucrat being given “rock star” treatment.
And I wouldn’t have believed it if I hadn’t been there to witness it.
I was at the Cannabis Business Summit & Expo in San Jose, Calif., on July 26, finishing up watching the keynote address from James M. Cole – the then-deputy U.S. attorney general who authored the 2013 “Cole Memo” shielding states with legalized marijuana from federal intervention.
However, everyone else at the McEnery Convention Center had similar plans.
Hundreds of folks rushed the stage – but summit organizers quickly pulled out their walkie-talkies, surrounded Cole, and rushed him out of the building as if he was Mick Jagger.
Sure, I was a bit disappointed – but I also had to laugh.
It was yet another example of the amount of excitement surrounding the legal cannabis industry.
And like so many of the legal weed’s time-line events, I was there to witness it.
In today’s report, I’ll tell you what else I saw at the summit.
And now that we’re apparently at the “rock star” stage of legal cannabis’ lifespan, I’ll give you my top three pot stocks to get you started.
From Bureaucrat to Rock Star
While I was surprised at the reception Cole (pictured below) received, I shouldn’t have been.
After all, his memo was the signature event that helped the burgeoning legal cannabis industry move into the mainstream.
Many attending the summit were able to enter the cannabis industry in the last few years thanks to Cole’s groundbreaking work and that memo – so they wanted to thank him.
Yes, earlier this year, U.S. Attorney General Jeff Sessions rescinded the Cole Memo. But that doesn’t concern those here in San Jose.
That’s because a workaround is in progress.
In fact, Sessions’ boss, President Donald Trump, recently said he supports a bipartisan bill known as the STATES Act that would allow each state to determine for itself the best approach to marijuana within its borders.
During our original conversation, Cole told me he is a big supporter of the STATES Act.
“On the federal level, it would in effect legalize marijuana industry activity as long as it’s in compliance with state laws,” Cole told me. “If it passes, it could be a pretty major step towards certainty in the country.”
As you might imagine, the STATES Act was wildly popular with those attending the summit.
Ben Bradley, a strategic consultant and former executive with the California Cannabis Industry Association, told me that industry members were already feeling optimistic before the STATES Act was proposed. A legislative compromise to the standoff between state and federal government will only help boost that sentiment.
“Empowering states to develop their own regulatory frameworks is definitely a good thing,” Bradley said. “It’s similar to when Prohibition ended [in 1933], allowing states to enact their own systems. And it goes along with the fundamentals, the fibers of our democracy, if you will.”
Larry Schwartz is president of Cannabiz Media, a firm that supplies customer relationship management software to the marijuana industry. He told me that the STATES Act fits the nation’s mood. This November, as many as 12 states will have legalization on their ballots.
“Anything that makes the industry more legit is a big help,” Schwartz said. “When we started doing this four years ago, there were only a handful of states where marijuana was legal. Now we are up to 30 or so, and more coming in the fall.”
Meantime, demographics are helping lead the charge toward legalization, Jesse Parenti, a partner in risk management firm Nine Point Strategies, told me.
“You have more than 70 billion baby boomers out there who are starting to change [drug] policies,” Parenti said. “The feds are really not coming in here to crack down on the legal use of marijuana.”
An Idea-Rich Environment
We’ve been pursuing legal cannabis profits for close to two years here.
And we’ve been quite successful.
But I’ve been tracking this field for much longer than that. Since 1996, in fact, when California made it legal to use cannabis for medical purposes. From that seemingly small start, the state has become a major marijuana powerhouse.
Even before it made recreational use for adults legal this past Jan. 1, California accounted for half the U.S. legal cannabis market. Then again, the state ranks as the world’s fifth-largest economy, with a GDP worth more than $2.7 trillion.
A report by the University of California Agricultural Issues Center suggests cannabis was adding $5 billion a year to the state’s economy – before recreational use even became legal.
So, you can understand why there was so much excitement here in the heart of Silicon Valley last week. To me, holding the summit here in San Jose was appropriate, given the Valley’s status as the place where cutting-edge investments get their start.
I certainly didn’t hurt for company or interesting ideas.
Sponsored by the National Cannabis Industry Association, the summit drew 7,500 people working in every single aspect of the industry. We’re talking everything from grow lights and hydroponic supplies to security services and edibles to harvesting tech, insurance, and marketing – not to mention industry data and other analytics.
I’m just scratching the surface here. With some 150 experts and industry leaders around, there were literally more workshops and seminars than any one person could possibly attend.
The 3 Best Plays Right Now
So as you can see, while positive changes to the law and more supportive attitudes toward legalization sweep the nation, this is a prime time to be investing in marijuana businesses. And that’s why I’ve brought your way several great cannabis plays.
We have smart tech exposure to cannabis through Microsoft Corp. (Nasdaq: MSFT). The software giant has invested in KIND Financial, a software developer that helps state and local governments track the cannabis business – and helps cannabis companies navigate those governments’ compliance regimes.
Moreover, Microsoft’s Azure cloud platform is helping cannabis upstarts to track all aspects of their operations. These kinds of moves have helped Microsoft hand us a nearly 82.8% gain since I recommended it to you as a play on legal cannabis.
Meantime, Scotts Miracle-Gro Co. (NYSE: SMG) CEO Jim Hagedorn a few years back moved his company, already the world’s largest maker of lawn-care and gardening products, into the legal cannabis market. He did so by making a big push into indoor plant cultivation through a $150 million purchase of General Hydroponics and other pot-related acquisitions.
Right now, shares are down because of a near-term earnings slowdown, so you can pick yours up at a discount. But more paydays from this stock are on the way as the legal cannabis market keeps growing.
Finally, on June 25, the U.S. Food and Drug Administration approved Epidiolex, the cannabidiol (CBD) childhood epilepsy drug from GW Pharmaceuticals (Nasdaq ADR: GWPH). That was the FDA’s first-ever approval for a cannabis plant-based drug – and opens the door for all kinds of future marijuana biotech treatments.
Now, I recommended GW Pharma to you folks nearly two years ago, before a significant price run-up. (It’s now up 19%.) And that’s just the beginning. With GW’s approval, the template has been set for a cannabis biotech revolution.
And the U.K.-based GW should get an even bigger boost now that its home nation has approved cannabis for medical use. On Thursday, the U.K. government said that some doctors will be allowed to legally prescribe medicinal marijuana starting later this year.
The United Kingdom is home to about 65.6 million people, so that’s huge news.
But a similar number of potential legal cannabis customers could come online by the end of this year in the United States alone.
That’s thanks to legalization efforts moving forward in at least 16 states.
As we’ve seen in previous election years, that’s the kind of mass movement that could help pot stock enthusiasts turn a small stake into $1 million – or more.
For my presentation on what exactly is happening on the state level this year – and to find out how to get my top pot stock picks – just click here.
Then, meet me back here later this week for more of my best research.
See you then.
Cheers and good investing,
Michael A. Robinson