American voters delivered a decisive win for marijuana advocates on Nov. 8. Pro-pot propositions passed in eight of nine states last Tuesday, with four states, including California, voting to create recreational marijuana markets, and another four states passing medical marijuana laws. The approvals set the stage for accelerating growth in what's already a fast-moving market, leaving us to ask: Should investors rush in to buy marijuana stocks?
In this clip from The Motley Fool's Industry Focus: Healthcare podcast, analyst Michael Douglass is joined by contributor Todd Campbell to discuss the impact of this year's marijuana legalization efforts and whether there are marijuana stocks to buy.
A full transcript follows the video.
This podcast was recorded on Nov. 9, 2016.
Michael Douglass: Let's also turn to marijuana initiatives. There were a number of them that passed, and a few that failed, as well. Florida had a medical marijuana...
Todd Campbell: Yeah. Nine states in total had marijuana on the ballot. Not all of them were recreational. To give a little refresher: There are four states right now that have passed recreational marijuana legislation. There are about 25 states that have passed medical marijuana legislation. On yesterday's ballots, you had California, Nevada, Maine, Massachusetts, and Arizona that had recreational on the ballot. Then, you had a host of other states -- Arkansas, Florida, North Dakota, Montana -- that were taking up the medical marijuana side. Broadly speaking, Michael, pro-marijuana advocates won the day yesterday.
Douglass: Yeah. You had medical marijuana pass in North Dakota, expanded use of medical in Montana, recreational in Massachusetts ...
Campbell: Yeah! Recreational passed in every state except for Arizona. California passed it, Nevada passed it. Maine was a really close call, I'm not sure if they've finished calculating all the votes. But early results show it passed there. Massachusetts passed as well.
Douglass: Yeah. So, certainly a big one for marijuana advocates. Of course, here's the thing with medical and recreational marijuana -- there are no good publicly traded business models right now that really rely on the sorts of things these ballot measures are talking about. You have your cannabidiol biotechs, but they're really not that related to medical or recreational use of marijuana. So, while their stock prices may or may not move based on a poll or the outcome of these initiatives, it really doesn't indicate anything about the underlying business model of a publicly traded marijuana company. There just simply aren't any good ones right now.
Campbell: Yeah, most of them trade on the pink sheets. They're not suitable for the majority of our listeners to even consider. It's not like you're talking about Reynolds or Philip Morris -- established companies. These are very fledgling companies that oftentimes have nothing more than addresses. Do not invest in these stocks until they get to the big time. I think the reason we talk about marijuana a lot on this show is simply because it's potentially expanding its use for different medical indications. There has been a lot of success using it in epilepsy, for example. And there are a lot of forecasts out there that show rising use of marijuana through legalization and through the expansion of medical marijuana laws could have this industry growing 30% annually for the next five to 10 years. So, there's definitely a big shift, and potentially a market opportunity here. However, it's still in the very early innings. In fact, I would say this is spring training. We haven't even started the game yet when it comes to marijuana.
Douglass: (laughs) Oh boy, another sports metaphor that goes right over my head -- no, I'm just kidding, I got that one. Thank you, Todd. I think that's exactly right. When you think about a lot of these political issues, government issues, you really need to think very carefully before you start picking winners and losers, because all too often, it's really just too soon to know.