The legal cannabis sector is no longer the "Wild West"-style marketplace it was back in, say, 2013, but there's still plenty of volatility compared with the placid broader markets.
Then again, that's why the right pot stocks reward forward-thinking investors with triple- and quadruple-digit gains. In fact, there's a bevy of micro- and small-cap companies, any one of which could be the next mega-cap blockbuster – the long-sought-after "Starbucks of weed" or "Facebook of pot."
My Nova-X Report's Roadmap to Marijuana Millions model portfolio is chock full of those kinds of stocks. Right now my paid-up members are sitting on gains of 915%… 520.6%… 442.7%… and five more triple-digit winners. If you'd like to find out how to take advantage of this green revolution and get in on gains like those, click here.
But I don't want to leave anyone with the impression that the only way to make a killing on pot stocks is to buy small, volatile companies. The gains from my Scotts Miracle-Gro Co. (NYSE: SMG) and GW Pharmaceuticals Plc. (Nasdaq: GWPH) recommendations prove that just isn't the case.
Then there's the company I want to tell you about today.
It isn't likely to quadruple your money quickly, but you'll likely smash the market with double- and even triple-digit gains, and it pays a dividend that puts you way out ahead of inflation and low interest rates, too.
What's more, all kinds of small legal cannabis companies are beating a path to its door for help with a very tricky problem…
Legal Pot's Watershed Moment
I'm talking about Microsoft Corp. (Nasdaq: MSFT) and its June 2016 move into the legal marijuana business.
No, the Redmond, Wash.-based tech juggernaut isn't marketing cannabis edibles or any potent new strains of weed.
Of course not. It won't touch so much as a seed.
Instead, it's all about the partnerships.
Rather, Microsoft has jumped in on the software side of the cannabis sector, partnering with Los Angeles-based startup KIND Financial to help ensure cannabis companies stay inside the legal lines.
Microsoft is working with KIND's Government Solutions division to make available to state and local governments the software they need to track cannabis companies' compliance.
As I've noted before, compliance is particularly important to the cannabis sector. The marijuana legalization trend represents a bold social sea change away from nearly 90 years of prohibition. So strict compliance is a way to make legal weed safe for consumers in a regulated marketplace and palatable to "law-and-order" types in governments and legislatures.
And compliance is strict: In some jurisdictions, failing to cross a "t" or dot an "i" opens the door to heavy fines and legal sanctions.
Many pot entrepreneurs lack the experience and knowledge necessary to comply with all state and local business regulations. I'm talking about everything from employment and labor laws to environmental regulations and tax codes
The stakes are too high to leave anything to chance in the $6.7 billion legal marijuana market – which will likely top $35 billion by 2020.
Pure Plays – and Pick-and-Shovel Plays
That's why Microsoft is in my Roadmap model portfolio – and why it should be in yours. The tech giant has made a big commitment to developing these tools for the legal marijuana sector.
And beyond KIND, there are many brilliant startups that will be pushing the likes of Microsoft to keep upping their game – or Microsoft will buy them out to fill a gap. Some of them are in that model portfolio.
Only marijuana firms with the best compliance and tracking programs will thrive in a space that more and bigger corporations are moving into.
"If you don't," says Jordan Wellington, director of compliance at the self-proclaimed "marijuana law firm" Vicente Sederberg LLC, "some rich, old guys are going to steamroll you."
To me, that means when you're investigating pot stocks, we don't just look at growers and dispensaries. We also invest in the pick-and-shovel plays that are developing the tech tools those companies need to survive and thrive – plays like Microsoft and Scotts Miracle-Gro.
"One false key stroke is a permanent violation," Wellington told me at a recent legal marijuana business expo. "You get enough of those non-compliance violations, you're not a grower or dispensary or research group anymore."
For its part, KIND (which created the software Microsoft is selling) "offers a range of products, including ATM-style kiosks that facilitate marijuana sales," according to The New York Times.
The software it created will allow governments and entrepreneurs a way to monitor the distribution of cannabis "from seed to sale" and ensure compliance.
David Dinenberg, KIND's CEO, told USA Today that "thanks to Microsoft's huge reach, it'll be easier for us to target every state with our compliance solutions. It's a win-win for both of us as more states look to legalize medical marijuana."
This is about more than keeping weed companies on the straight and narrow, though…
About the Author
Michael A. Robinson is one of the top financial analysts working today. His book "Overdrawn: The Bailout of American Savings" was a prescient look at the anatomy of the nation's S&L crisis, long before the word "bailout" became part of our daily lexicon. He's a Pulitzer Prize-nominated writer and reporter, lauded by the Columbia Journalism Review for his aggressive style. His 30-year track record as a leading tech analyst has garnered him rave reviews, too. Today he is the editor of the monthly tech investing newsletter Nova-X Report as well as Radical Technology Profits, where he covers truly radical technologies – ones that have the power to sweep across the globe and change the very fabric of our lives – and profit opportunities they give rise to. He also explores "what's next" in the tech investing world at Strategic Tech Investor.