In the last two years, the cannabis industry has seen spectacular growth. Some pot stocks have risen by as much as 1,000% since 2016.
However, investments in frontline marijuana stocks may not have much upside to offer now, as many people are potentially over-invested in them.
Looking at the current stagnation in the mainstream marijuana market, some are cycling out of stocks that are directly involved with cannabis production and reinvesting proceeds into stocks in the ancillary cannabis industry.
This industry comprises companies that work behind-the-scenes to support marijuana trade — without touching the plant directly.
Most of these ancillary operators have remained out of limelight throughout the years of excitement about the expansion of legalized marijuana.
Now these companies could be holding the potential to surprise Wall Street in the times to come as North America and the rest of the world warms up to the idea of legalized medical and recreational weed.
The most promising opportunity for investors might currently lie within the marijuana supply chain. Companies gearing up to meet the rigorous branding, marketing and packaging requirements of legalized pot products could be the next big thing.
For instance, Kush Bottles, a California-based company specializing in the design and manufacture of child restraint containers and pop-top bottles for the cannabis industry could offer solid potential gains.
The company already serves over 5,000 legal cannabis dispensaries worldwide and has practically locked itself in as the go-to support services provider for the cannabis industry.
Industry analysts expect another unique ancillary cannabis business to be in hot demand in the times to come — a pot breathalyzer. At present, there are no clear guidelines about what involves cannabis impairment while driving.
A key hurdle is that the psychoactive component of marijuana, THC, can stay in the body for days.
As a result, it may lead to a false positive test, even when the driver has not used marijuana for many days. This is where cannabis breathalyzers might come into play.
The companies that are working on this front to provide solutions to law enforcement to keep the roads safe from drivers under cannabis influence could be worth keeping an eye on as an investor.
The real boom in the cannabis mainstream and ancillary industry stocks would happen when marijuana gets legalized not just at the state level but also the federal level.
According to investor Kevin O’Leary, stars of the “Shark Tank” reality show, billions of dollars are waiting on the sidelines in the hope that affirmative changes to legalize cannabis at the federal level will take place.
The entire industry’s approach, according to O’Leary, should be to focus all its energy towards finding ways to achieve a federal mandate.