Colorado Marijuana Use Law

Colorado has two sets of laws regarding marijuana. These have to do with recreational use and medical use.

Colorado Amendment 64 states:

Adults aged twenty-one or older can grow up to three immature and three mature cannabis plants privately in a locked space, legally possess all cannabis from the plants they grow (as long as it stays where it was grown), legally possess up to one ounce of cannabis while traveling, and give as a gift up to one ounce to other citizens 21 years of age or older. Consumption is permitted in a manner similar to alcohol, with equivalent offenses proscribed for driving. Public consumption remains illegal. Amendment 64 also provides for licensing of cultivation facilities, product manufacturing facilities, testing facilities, and retail stores.

This law allows for sales of marijuana for recreational use, taxation of profits from these facilities, and various ordinances relating to such establishments. It is the potential for profit from recreational use of marijuana that is of primary interest for those investing in marijuana stocks. Beware of marijuana stocks that do not comply with the law in Colorado.

Medical Use of Marijuana in Colorado

Colorado Amendment 20 allows for the use of marijuana in the state for approved patients with written medical consent. Patients may possess up to 2 ounces of medicinal cannabis and may cultivate no more than six cannabis plants (no more than three of these mature flowering plants at a time). Conditions recognized for medical cannabis in Colorado include: cachexia; cancer; chronic pain; chronic nervous system disorders; epilepsy and other disorders characterized by seizures; glaucoma; HIV or AIDS; multiple sclerosis and other disorders characterized by muscle spasticity; and nausea. Colorado medical cannabis patients cannot fill prescriptions at a pharmacy because under federal law, cannabis is classified as a schedule I drug. Instead, patients may get medicine from a recognized caregiver or a non-state-affiliated club or organization, usually called a dispensary.

Beware of marijuana stocks that focus on providing marijuana for a handful of people with rare diseases. This may well be a laudable social goal but not especially profitable. Too often really bad stock investments come from really good intentions.

Invest in or Beware of Marijuana Stocks

Remember when checking out new stocks in a new market niche that more folks made more money selling picks and shovels during the gold rush than made money digging for gold. Here are a few companies that may make money in the world of recreation and medical marijuana:

• GreenGro Technologies sells growing systems and equipment to marijuana farmers. Its stock went up fifty percent of late
• GW Pharmaceuticals deals with medicines derived from marijuana. Its stock rose a few percent at best.
• Hemp, Inc grows industrial hemp and sells hemp seeds as food went up fifty percent.
• MedBox makes high-security storage and dispensing machines for controlled medicines. Its stock rose by fifty percent.
• MediSwipe Inc sells financial processing systems to the medical industry. Its share price recently climbed by about 70%.
• Two California firms dealing with marijuana for medical use rose in price recently, Medical Marijuana Inc. and Cannabis Science.

Total market size is perhaps ten billion for recreational marijuana. However, it remains to be seen how many illegal users of pot will convert to legal users and submit to what they may see is nitpicking restrictions. As always consider the intrinsic value of stock and beware of marijuana stocks that do not have a clear forward looking income stream!

More Resources

The Southern Company – and Other Utilities

The Southern Company started 2004 with a valuation of $33 a share. It has paid 41 dividends in the last ten years and currently has a dividend yield of just less than 5%. Its quarterly dividend has crept up from 35 cents a share a decade ago to 50 cents share today. A threat to the value of this stock is the prevailing interest rate. When the Fed started talking about reducing the quantitative easing stimulus program in May of 2013 interest rates went up a bit and the value of the Southern Company fell from its peak of $48 to its current value of $40 a share. As the Fed backs off of its stimulus program we can expect to see interest rates go up farther and we can expect to see the price of Southern Company stock fall farther. However, the dividend that this utility pays comes from a very stable business that will not suffer unduly if the Fed backs off its stimulus program as the economy improves. If the stock falls another $10 a share it will be paying a dividend of more than 6%. Our belief is that The Southern Company belongs in your list of possible stock picks for 2014, once interest rates rise and the market falters.

Here are a few more utilities to consider:

Other factors to consider when including utilities in your stock picks for 2014 are that these are largely recession proof stocks. If things go bad in China, people in the USA still need electricity for their homes. Energy costs have gone down with the advent of sustainable fracking technology which fact benefits all utilities.

What Constitutes a Vulnerable Stock?

Your stock picks for 2014 should not include vulnerable stocks. A time honored way to pick stocks is to look a recent profits and quality of management. A contrarian view is to look at the strength of a brand name. For example, Coca Cola can make a lot of mistakes and even have a bad quarter and the entire world still recognizes and wants a Coke. Microsoft is not growing rapidly but it is an institution that is largely recession proof. On the other hand Apple is riding a wave of success and needs to pull a magic rabbit out of the hat every year to stay on top. Consider these thoughts when choosing Coca Cola – KO, Apple – APPL or Microsoft – MSFT for your stock picks of 2014. And, by the way, there is nothing wrong with investing in beer or other things that people consume during both good and bad times!

More Resources