Scotts Miracle-Gro Co. (NYSE: SMG) stock is already up a staggering 34% this year, compared to the S&P 500's 6.4% rise.
And SMG stock is poised to rise even more as it just made three major investments in the marijuana industry that total $326 million.
In fact, Money Morning Director of Tech & Venture Capital Research Michael A. Robinson said SMG stock could soar 30% over the next 12 months as more states legalize marijuana.
If you're not familiar, Scotts Miracle-Gro makes lawn and garden products, like plant fertilizer and insecticide. But the company has recently begun expanding its product offerings into an obscure - but highly profitable - marijuana subsector.
We'll talk about this subsector and Scotts' three "marijuana" investments in just a moment. But before we do, here's why this Fortune 1000 company is investing in the marijuana industry.
Why Scotts Wants Exposure to the Marijuana Industry
On Nov. 8, seven new states legalized marijuana in some form. That brings the total number of states with a form of legalized marijuana up to 33. Twenty-eight of these states have legalized medical marijuana, and five have legalized both recreational and medical marijuana.
Big companies like Scotts are now embracing the public acceptance of marijuana.
That's because by 2020, the marijuana industry is projected to become worth $35 billion, according to a 2015 report from the Bank of America and Merrill Lynch.
With marijuana legal in many states, consumers are looking to cultivate their own plants. The marijuana-growing market could easily exceed $100 billion within five years, according to Robinson, who has created a 90-page report about investing in the marijuana industry. [Editor's Note: Check out Robinson's complete marijuana report, right here.]
Scotts, being one of the world's largest lawn-care and garden products producers, sees a major opportunity in this market.
And with its three new investments, Scotts has already started profiting from marijuana growers....
Why SMG Stock Will Benefit from These Three New Marijuana-Related Investments
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Scotts is making a strategic move into hydroponics: the process of using air, water, and light to grow plants indoors without the need for soil.
Specifically, Scotts purchased General Hydroponics for $150 million back in April 2015. Around the same time, it also bought Gavita, a Dutch hardware and grow lighting company for $136 million. And more recently, it purchased Botanicare, a hydroponics producer that has logged nearly $40 million in sales, according to The Cannabist.
Even setting hydroponics' marijuana application aside, the value of hydroponically grown plants is on track to rise from $17 billion in 2013 to $24 billion by 2018, according to Robinson.
"If other countries follow the lead set by the United States, pot cultivation - and hydroponics - could well soar much higher than that," Robinson said on Nov. 10.
Already, Scotts' "marijuana acquisitions" have increased sales by more than 20% since 2015 - nearly four times the growth rate of the rest of the lawn-care company, Robinson said. In addition, these hydroponics firms contributed to Scotts' 50% profit climb over the past four years.
As mentioned previously, Robinson predicts SMG stock could soar 30% in just the next 12 months as more states legalize cannabis. That gives the stock a price target of $113 per share by October 2017, based on its current price of $87.19 per share Wednesday intraday.
Up Next
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