The growing, nationwide political climate is shifting in favor of marijuana legalization.
But finding the best pot stocks to invest in right now to capitalize on what promises to be explosive growth in the years to come is a conundrum.
And that's for one simple reason.
There's a difference between finding the best cannabis companies right now and finding the best pot stocks to invest in right now.
The most compelling companies currently in the space are not publicly traded.
The best opportunities are not those pot penny stocks that came about as a result of a reverse merger or as a self-underwritten public offering on over-the-counter markets. We already saw with the U.S. Securities and Exchange Commission crackdown last year that there was no shortage of shell companies looking to seize on the legalization efforts in Washington to orchestrate pump-and-dump schemes.
The truth is, if you want to strike it rich with pot stocks, you have to be a long-term angel investor or a friend to a private start-up, buy in now, and then wait for however many years it takes for that company to go public.
And that's not something individual investors can really do.
"Barring probably a couple of exceptions, the publicly traded space is probably one to avoid at this point," 4Front Ventures co-founder and managing partner Kris Krane told Money Morning. "It's just too volatile. There are too many shell games and reverse merger games and it's not a great space to look at right now."
The marijuana companies with the most potential, and perhaps the winning pot stocks at a future date, have an IPO at the back of their mind...
The Best Pot Stocks to Invest in Right Now vs. The Best Pot Companies
The best cannabis companies right now are looking for niches.
They aren't trying to make a run at cultivating the plant and selling the product in dispensaries. They aren't looking at the industry purely for its medical and recreational applications.
Jeremy Carr, who's looking to unveil BlazeNow, an iOS and web-based app to also be offered on Android, will provide listings for dispensaries as well as point-of-sale and inventory management services. BlazeNow represents a tech niche within the cannabis sector, an indication that there's more to pot stocks than just cultivation and distribution.
What's encouraging about Carr's venture is that he is focused on growing the business and breaking into the space. What he's not looking to do is dangerously pump up his stock price - like a lot of other players in the space did last year...
"It is traded," Carr told Money Morning. "I've just been more focused on getting the product finished. I'm not trying to heavily promote the stock, I want to concentrate on building the business to get it out there and let people see for themselves."
BlazeNow is a product offering from Evergreen Systems Inc., a subsidiary of Mediatechnics Corp. (OTCMKTS: MEDT).
For Julianna Carella, CEO of Auntie Dolores - a THC-infused edibles company - going public is the last thing on her mind.
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"We don't have any intention of going public anytime soon because we don't think it's feasible in our industry yet," Carella told Money Morning.
Auntie Dolores started in 2008 in San Francisco, at a time when, according to Carella, "there weren't any gourmet edibles out there" in the cannabis space. She said she sees a lot of growth in the industry as the political climate continues to shift toward legalization - whether that's for medical or recreational purposes.
"It seems like every month, more and more people are becoming open-minded in investing in the space," Carella said.
Then there's Loft Tea. Loft Tea is a New York-based health and wellness startup preparing for pre-sales of its hemp-infused tea. Founder Michael Christopher said he wants to gauge the demand, work on the marketing, and eventually expand to cannabis-infused products with locations in Nevada.
He's focused on getting his product out the door, not stock offerings. For him, it's not about explicitly jumping into the cannabis space, but rather leveraging shifting political attitudes to reach demographics that aren't necessarily about "getting high and consuming" or using the product strictly for medicinal purposes.
"We are trying to incorporate a wellness-focused, herbal remedy lifestyle, which is separate from the cannabis movement," Christopher told Money Morning. "We're really trying to merge these two high-growth areas of wellness, as well as legalized cannabis. We're using tea as the way to do that."
Jim Bach is an Associate Editor at Money Morning. You can follow him on Twitter @JimBach22.
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