What a way to ring in the new year, California!
While most of the Bay Area was still asleep, thousands of polite, cheerful, and suddenly law-abiding marijuana customers awoke before dawn on New Year’s Day to stand in line for the state’s first-ever legal sales of the long-demonized plant.
The sky didn’t fall. Stoned zombies didn’t crash cars. U.S. Attorney General Jeff Sessions didn’t jump from the bushes with handcuffs…
Defying federal law, Californians voted for cannabis legalization in November 2016 by passing Proposition 64 with 57% of the vote.
While marijuana has been legal to use ever since then, it’s still been illegal to buy or sell until now.
First day sales were booming in lucky shops that were fortunate enough to have secured one of the roughly 100 state licenses issued so far — with some stores having hundreds of customers lined up since the night before, eagerly waiting for legalization.
However, state and local governments still have a lot of work ahead of them in order to get the massive industry running at full capacity. And the industry is projected to bring in $1 billion annually in tax revenue within the next few years.
Regulators at the Bureau of Cannabis Control (BCC) worked endlessly throughout the holiday season to process 1,400 pending license applications for retail sales, distribution, testing facilities, and other businesses, BCC spokesman Alex Traverso said.
A flood of applications for shops in LA and San Francisco is expected after being approved locally, as well. Because Los Angeles is the biggest market in the entire state, some of those shops will be licensed more quickly than others already in line.
With sales lighting up all around California, the nation’s most populous state has joined a growing list of other states that have legalized pot in some capacity, including the nation’s capital where so-called “recreational marijuana” is permitted, even as the federal government continues classifying pot as a controlled substance alongside drugs like heroin and LSD.
Despite the ever-lingering controversy, store owners in California had stocked up in expectation of huge demand.
Matt Lucero, owner of Buddy’s — a dispenser of medical marijuana in San Jose, California — states that New Year’s Day was probably the company’s busiest day in its seven-year history. Lucero holds the first license issued by the state of California to also sell recreational weed.
While speaking with CNN, Lucero stated he was expecting to see a 30% bump in sales overnight, but it appears that the actual numbers skyrocketed to between 50%–60%.
Not everyone who purchased marijuana on Monday plans to ever smoke or ingest it.
In Southern California, Rome VanBergen traveled from Long Beach to Santa Ana to be one of the first people to buy cannabis when the dispensary 420 Central opened at 7 a.m.
While she doesn’t use it, she’s been a longtime advocate for cannabis legalization, so she wanted to buy the taxed product and show her support for legal shops in hopes that other cities and states will take note.
Because many cities, especially in California’s Central Valley, remain opposed to the legalized cannabis business because of public health and safety concerns. Most cities, like Los Angeles and San Francisco, are either banning sales or are taking a wait-and-see approach.
And even many cannabis advocates acknowledge that there’s still work to do. They’re frustrated by the high sales and excise taxes. They’re worried by the all-cash economy putting businesses at risk of violent crimes and limiting the ability of businesses to secure loads. They’re also seeking direct marketing — currently banned — to allow sales at farms, markets, and events.
But while America continues working out the kinks of cannabis legalization, there’s a way to still play the legalized pot game through marijuana stocks.
The following are poised to be the best cannabis stocks for the coming year…
Scotts Miracle-Gro Company (NYSE: SMG)
While this company doesn’t immediately correlate with cannabis, it’s still one of the most obvious picks for the new year.
Scotts Miracle-Gro is the household name that everyone thinks of for healthy green lawns. But now, it’s a name that also means healthy green weed.
Thanks to its 2015 acquisition of General Hydroponics, Scotts has been actively acquiring businesses like it that specialize in creating conditions conducive to growing marijuana plants.
You see, Scotts is not just a worldwide leader in lawn and gardening care — it’s also a worldwide leader in hydroponics equipment.
The company’s annual revenue over the past 12 months was about $2.6 billion. And about a tenth of that came from its hydroponics business.
This revenue should continue growing, especially now. The stock spiked into year-end 2017 based on the California news and the obvious trend.
And California’s new legalization came with a caveat for cannabis growers: new water regulations.
These new laws will force cannabis companies to completely rethink and rework the ways in which they grow their plants.
For California companies looking to comply with the latest regulations, turning to hydroponics will be an absolute no-brainer.
And with a $565 million stake in the industry, Scotts Miracle-Gro should see a huge boost in sales on top of an already excellent year for the company…
Kush Bottles, Inc. (OTC: KSHB)
There’s more to the cannabis industry than just the plants, and Kush Bottles is profiting from cannabis without even touching the plant.
It’s a lesson made crystal clear by Kush Bottles — a small-cap company based in Santa Ana, California, that’s carving out its name in a market that’s just getting started.
The company was founded in 2010 to service a burgeoning cannabis industry on the West Coast. Last year, Kush grew to over $18.8 million in revenue.
It’s touted as a sales and distribution platform offering products and services for businesses and consumers in the cannabis market. While its bread and butter is childproof packaging for cannabis products, Kush also develops labels, accessories, vapes, pipes, and more.
In seven years, it’s sold over 100 million units and now services more than 4,000 legal cannabis entities.
But its 100% year-over-year growth goal hasn’t come easily, because it’s extremely difficult to grow a business in the cannabis industry.
Despite that, Kush has impressively kept its nose to the grindstone. The company is aiming to achieve a diverse business portfolio. CEO and cofounder Nick Kovacevich is capitalizing on a corner of the business that many others have.
That’s because, according to California’s Assembly bill 110, which also became a law on New Year’s Day, all cannabis packaging much be certified as child-resistant.
Before the bill, Kovacevich said Kush was competing with Ziploc and brown bags. Now that there’s regulation, his business could become the leaders in a newly regulated, fully legal market…
Alternative Harvest ETF (NYSE: MJX)
The Alternative Harvest ETF is the first-ever New York Stock Exchange-listed marijuana ETF.
It just went live last week, so you can still benefit from its first-mover advantage. It’s blown up 18% in just one week, thanks to the end of marijuana prohibition in California.
And its Canadian counterpart, with many overlapping holdings, Horizons Marijuana Life Sciences ETF lit up 12%, too.
Alternative Harvest was previously targeted toward Latin American real estate but recently shifted to include 30 different national and international companies all involved — directly or indirectly — within the legal cannabis space…
The Bottom Line
Per Marijuana Business Daily’s annual report, legal pots sales have skyrocketed 30% in 2017, which is equivalent to $5.1–$6.1 billion in total revenue.
In fact, sales are expected to reach $6.7–$8.8 billion throughout the new year.
Such a stellar growth is possible because of the ever-increasing number of U.S. states voting to legalize recreational pot.
Legalization of recreational weed in California is helping cannabis stocks in moving north, kicking off the new year right with a green fervor never seen before.
That’s all for now.
Until next time,
John Peterson
Pro Trader Today