The marijuana industry scored a major victory on Nov. 8, when four states voted for recreational legalization. But new 2017 marijuana laws have some investors worried about investing in the billion-dollar market.
The DEA wants to classify cannabidiol (CBD) as a Schedule I drug by the middle of January 2017. CBD is an extract from marijuana and hemp that is mainly used in the medical field. It was legal to purchase if it was extracted from hemp before the DEA's Dec. 14 announcement.
If the CBD product was extracted from marijuana, you would need a prescription to purchase it.
But even with these new marijuana laws, marijuana investors should remain bullish...
Nearly 60% of the country has some form of marijuana legalization, and states with medical and recreational legalization, like Colorado, are generating billions in sales. According to The Cannabist, marijuana sales for the first 10 months of 2016 topped $1 billion in Colorado.
The industry has grown too large to shut down.
For marijuana stock investors, here's more on the emerging CBD market and how the new marijuana laws could impact the field...
The DEA's Effects on the CBD Market
Because of the Industrial Hemp Farming Act of 2015, hemp was excluded from the Controlled Substance Act. CBD was considered a dietary supplement from the FDA, which made products made from hemp extracts legal.
CBD from hemp was legal because it's low in THC, a psychoactive compound found in marijuana. CBD can also be extracted from marijuana, but its higher levels of THC means a prescription is needed for products with CBD extracted from marijuana.
Before these new marijuana laws, CBD sales were projected to reach $2.21 billion by 2020, according to The Hemp Business Journal.
Now with hemp and marijuana CBD extracts soon to be illegal, these projections could be scaled back. Companies that develop CBD products can now only target customers with medical marijuana prescriptions.
BRILLIANT: Average Americans Are Becoming Marijuana Millionaires
But there are other ways to invest in the marijuana industry and profit without owning companies that only sell marijuana and CBD products.
In fact, there's two companies not directly involved in the cannabis industry that could make millions from marijuana sales...
Two Surprising Marijuana Stocks to Watch in 2017
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The first marijuana-related stock we're watching for 2017 is Microsoft Corp. (Nasdaq: MSFT).
On June 16, KIND launched KIND Government solutions with Microsoft to acquire government contracts for seed-to-sale tracking.
KIND Financial develops software for marijuana growers, sellers, and government agencies to monitor the marijuana industry from "seed-to-sale." It uses the data it collects to ensure every marijuana bud is processed in compliance with state law and federal guidelines.
According to Business Insider, Microsoft packages KIND's software in a suite of cloud-based tools that's distributed to clients in state, county, and municipal governments.
Microsoft crushed earnings expectations in Q1 2017 because of its cloud-computing and subscription services. Microsoft reported earnings per share (EPS) of $0.76 on $22.3 billion in revenue. Analysts had expected $0.68 on $21.71 billion.
The MSFT stock price has climbed 17% in the last 12 months, and its growing cloud-based revenue should continue to climb. MSFT also offers a dividend of $0.39, which is a yield of 2.46%.
The second marijuana-related stock we're watching in 2017 is Scotts Miracle-Gro Co. (NYSE: SMG).
According to Market Realist, Scotts' sales are projected to reach $3.1 billion for 2017. That would be a year-over-year increase of 6.4%.
And part of this impressive sales growth is coming from the marijuana industry...
You see, Scotts is reliant on major retailers like Wal-Mart Stores Inc. (NYSE: WMT) to sell its products. Retailers were rapidly opening new locations between 2001 and 2009, but that stopped during the financial crisis of 2008 and 2009.
Without new stores opening to reach new customers, Scotts' revenue became stagnant.
In order to grow sales, CEO Jim Hagedorn began investing in companies that service the marijuana industry.
In 2014, Scotts created a subsidiary called the Hawthorne Gardening Co. that's known for its hydroponics solutions. Hydroponics is a system where plants are grown in a liquid nutrient solution. This can make growing cannabis plants easier because plants are able to grow indoors.
Through Hawthrone, Scotts purchased General Hydroponics in 2015 for a reported $130 million. General Hydroponics offers a variety of hydroponic and aeroponic systems.
According to The Cannabist, Hawthrone is expected to generate more than $250 million in revenue for 2016.
As you can see in the charts below, more analysts are placing a "Buy" or "Overweight" rating on SMG stock. As of June 2016, only 38% of analysts recommended buying SMG. Now, 67% recommend buying Scotts Miracle-Gro stock.
Over the last 12 months, the SMG stock price has climbed 48%. Scotts also offers a dividend of $0.50, which is a yield of 2.11%.
But these are just two of the marijuana stocks on our radar for 2017.
To help our readers navigate the marijuana industry and make investing profitable, we have a special opportunity from Money Morning Director of Tech & Venture Capital Research Michael A. Robinson...
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