It’s estimated that the legal cannabis industry will be worth $146.4 billion by 2025. The statistics behind this industry’s massive growth is enough to make any investor salivate, but there’s still one major problem holding the industry back.
While legal cannabis has been producing revenue hand over fist for states like California and Colorado, it’s still not legal at the federal level. This has caused massive problems for legal growers, and it could also cause problems for investors as well.
The uncertainty that surrounds the industry makes cannabis stocks extremely volatile. If you don’t quite have the stomach for that kind of roller coaster ride, then Mark Twain might have a better approach for investing in cannabis without making yourself ill.
“During the gold rush it’s a good time to be in the pick and shovel business” – Mark Twain
Use the Pick and Shovel Play
What exactly is a pick and shovel play? Simply put, it’s the strategy of investing in the underlying technologies that are required by another industry. This allows you to invest in that industry indirectly and reap the benefits of it with less risk than investing in it directly. You’d choose to utilize a pick and shovel play when you believe that the actual industry that you’re interested in may be overvalued.
In order to use this strategy for yourself, think about what kind of services that the legal cannabis industry would need. This might include things like real estate for farms or dispensaries, fertilizers, grow lights, hydroponics equipment, etc.
While it can be easy to get caught up in the glitz and glamour of the plants themselves, the truth is that the trickle-down effect to other industries could be quite large. This time around the gold rush is green, and the shovels look a little different, but the same concept still applies.
5 Hot Picks and Shovels for the Cannabis Industry
Scotts Miracle-Gro (SMG)
While you likely know this company already for the products you might use for fertilizing your rose garden, what you might not know about them is that they have been making a play for the legal cannabis industry for several years.
This company not only sells fertilizer, but they also sell grow lights. A large percentage of marijuana is grown indoors, and lights required to grow the plants is an enormous expense for grow operations. That puts SMG in a great position to profit from this industry’s future expansions.
Miracle-Gro has also invested heavily in hydroponics solutions. This method of cultivation can produce greater yields of marijuana crops much faster, and SMG has the infrastructure in place to help push more of these products to legal grow operations across the country.
BioLargo handles something which you might not immediately realize is related to cannabis. That is until you realize that this company can solve one of the industry’s biggest problems, which is the offensive odor that grow operations produce.
Pot stinks and this odor is causing problems with neighbors that could end with some legal operations getting booted from neighborhoods if they don’t find a solution fast. Fortunately, BLGO has the answer, and they’ve jumped on the opportunity to sell their CupriDyne Clean product to the cannabis industry as the perfect solution to a very pressing problem.
While they have not identified any partners as of yet, they have been working hard to finalize agreements and have picked up a few customers for their products. Their blog also states that trials are underway in the cannabis industry.
The company has already proven its product in the waste management sector, but cannabis could prove to provide big revenue to them in the near future.
CannaOne Technologies Inc. develops and markets various digital tools to service various segments for the cannabis industry in Canada. Its flagship product is BloomKit.
The Bloomkit product was developed with modular dynamic features in mind, such as the capability to offer unique themed online storefronts for dispensaries, to inherently monitor and track pick-up and delivery logistics, and to deliver historical and current trending analytics to ensure optimal management of medical and recreational sales channels.
They’ve recently penned a deal with Manna Health and plan to launch the first CBD marketplace in Mexico. CannaOne will exclusively build, manage and oversee a customized enterprise version of BloomKit for Manna Health intended to be the “go-to” online CBD product marketplace in Mexico.
As CannaOne continues to gobble up global marketspace, this (currently) undervalued, tech company will become an even bigger force than it already is and one of the most unexpected pot stocks.
Kush Supply (KSHB)
This interesting little micro-cap company trades in the pink sheets, so they aren’t really established, but they provide a very niche service. They are a one-stop-shop for the legal cannabis industry.
The company handles compliance issues, supplies packaging and even helps to create marketing campaigns for other cannabis companies. They’ve already enjoyed a good deal of growth, and if the medical marijuana industry continues on its path they should run right alongside it.
While most people know that banking is a serious pain point for legal cannabis, advertising is also a major hardship. Many networks do not allow them to advertise there at all, and that makes a company like Kush Supply even more valuable to the industry since they can help bridge the marketing gap for these operations.