Twenty years ago, it was vilified as a “gateway drug.” Now, cannabis has grown into a big business, with the potential to become even bigger as laws are scheduled to change to reflect shifting social attitudes towards marijuana and investment picks up to take advantage of increased demand.

And make no mistake: the demand is huge. In the United States, the legal cannabis industry is worth $6.7 billion, according to Bloomberg.

In Canada alone, cannabis is estimated to reach an $8 billion market with 150,000 people using marijuana for medical purposes. Yet estimates indicate that number could increase dramatically after pot is legalized next year: by 2021 there could be 3.6 million legal users consuming 420,000 kilograms of pot.

With the legal cannabis industry still in its infancy, the potential for growth is huge. At the moment, legal growers supply only 31,000 kilograms of Canada’s weed, or 5 percent of anticipated total medical and recreational demand. To avoid bottlenecks and keep supply coming, Canada’s pot-growing business must take off, and fast. Dozens of underground producers, who have grown illegally for years, could start supplying existing demand within a few years, if they can obtain licenses and build instructure.

Cannabis is virtually unique: an emerging sector tainted for years by high-risk and regulatory uncertainty, it has yet to be penetrated by tier-one capital, as institutional investors have stayed away.

Investing in cannabis can be tricky. Publicly-traded companies are scarce, most are small-cap and penny stocks, and finding those with strong prospects for growth can be challenging. The amount invested globally into cannabis ventures remains relatively small, only $220 million in 2016. Yet that’s a significant increase from investment in 2013, which was a scant $13 million.

But the opportunities for smaller investors to get in the ground floor are significant, especially when you look at what some newer firms are bringing to the table and the likelihood that larger firms, particularly those in the tobacco trade, will get in on the action as well.

Here’s a look at some companies that are getting into the cannabis game:

Philip Morris (NYSE:PM)

It makes sense for a major tobacco company to be interested in cannabis. Back in the 1960s, when social interest in marijuana began to grow, rumors circulated that Big Tobacco was buying up brand names for marijuana products while considering investments in cannabis production.

A crackdown on drug use and a pushback against marijuana quashed that attempt, but with the norms changing, a few of Big Tobacco’s most prominent members are reevaluating their interest in cannabis.

A major reason is the declining sales of cigarettes. For the last several decades Big Tobacco have focused on emerging markets as smoking faded in the developed world. But marijuana represents a lucrative new market, one which is attracting new attention from the larger tobacco firms, albeit in a slow, hesitant fashion.

With the regulatory situation in the United States and elsewhere still uncertain, larger firms are wary of investing too much in a sector which could remain constrained.

Philip Morris is no exception. In 2016 the company pumped $20 million into Syqe Medical, an Israeli firm developing new technology for inhaling medical marijuana, the second-largest cannabis deal of 2016. Rumors circulated in 2016 that the company was about to introduce a weed cigarette, but the news proved false.

The company has been exploring reduced-risk smoking products, with its heated-tobacco iQOS system currently under consideration by the US Food and Drug Administration as a “modified risk tobacco product.” It isn’t much of a stretch to see the company moving from this technology to similar tech that focuses on medical marijuana.

While additional signs from the tobacco firm regarding interest in marijuana have been sketchy, smart speculation would point to a growing interest to take advantage of marijuana use. Despite its initial hesitation, it seems likely that Philip Morris will attempt to become more involved in cannabis in the future.

Cannabis Wheaton (TSX:CBW.V; OTC:KWFLF)

Canada looks like the next big frontier in marijuana plays. The country is looking at full legalization on July 1, 2018, which would make it the world’s first federally regulated major marijuana sector. That means companies based out of Canada and capable of scaling up quickly to meet the demands of the market could become the world’s weed “multinationals,” rivaling the big U.S. and European tobacco firms.

One company that is ready to take full advantage of Canada’s demand for marijuana is Cannabis Wheaton. The company’s novel approach to demand challenges takes a leaf out of Netflix’s book: “streaming weed,” by which the company offers a life-line to growers in exchange for royalties.

This financing model is similar to that used in the mining industry, and it should provide Cannabis Wheaton with the flexibility to scale up supply quickly, in order to meet Canada’s weed demand, without undertaking the risks of putting all of its money into one supply source.

CBW already has 15 partners, with 17 facilities and the potential to achieve 1.4 million effective square feet of productive acreage. In exchange for the construction capital provided to its partners, CBW gets a minority equity interest and a percentage of such partners cannabis production. CBW has established relationships with 39 clinics already and has access to 30,000 registered medical marijuana patients, a fifth of Canada’s existing legal market.

Cannabis Wheaton is the only company on the legal-distribution finance source track, and its game-plan looks solid and relatively low-risk. If one producer falls through, say if the crop goes bad or the regulators find a problem, CBW can quickly pivot to another.

More importantly, this structure allows the company to take profits and quickly re-invest them into new sources of supply: the potential for a quick scale-up when pot becomes fully legal in Canada next year is immense, particularly when you factor in CBW’s expected low operational costs.

Demand is expected to increase rapidly and access to capital is going to be a major constraint for smaller firms looking to fill the market’s need for production quickly. CBW’s royalty-model should allow it to profit quickly from expanded production, allowing it to pump fresh capital into new production, assisting growers who would otherwise only be able to scale up slowly.

Recent catalysts for the company’s future prospects include a $15 million purchase of shares in ABcann Global Corporation (ABcann) in August, which forms part of a larger investment into ABcann that will add 50,000 square feet of acreage to ABcann’s cultivation facility. Another $15 million purchase of ABcann shares is scheduled for next year, with half of the production revenues of such 50,000 square foot expansion going to CBW.

ABcann (TSX:ABCN.V) could become a major supplier to CBW in the future, as it brings this new capacity on-line. With a planned for margin of $4.5/gram, that could translate into a 70 percent internal rate of return.

The company’s leadership, including CEO Chuck Rifici, has a strong track-record in bringing marijuana ventures to profitability. Rifici led Canopy Growth Corp. to its public offering in April 2014, building the company to a market cap of $1 billion, and he looks poised to duplicate that success with Cannabis Wheaton. There is strong political support for CBW’s model, which will help with a smoother transition for Canada’s cannabis sector as it goes legal next year.

With support like this, a strong model and high potential for immense growth once legalization takes off, Cannabis Wheaton is definitely a cannabis stock to watch.

Altria Group (NYSE: MO)

The largest cigarette seller with over half the market in the United States, Altria could be poised to enter the weed business, as cigarette sales decline and medical marijuana becomes more acceptable and tightly regulated. Like Philip Morris, the company is wary to go all-in when the regulatory environment within the U.S. remains so uncertain.

The company is a true blue-chip, a reliable source of dividends and a strong earner. Since last year, Altria has been watching emerging marijuana legislation very closely, as it invests heavily in vape technology. Speculation that the tobacco giant was getting into the weed game began in 2015, as the company’s cigarette sales were in decline, though revenue was sustained by price hikes.

So far, there’s no hard info on the company investing in marijuana start-ups or technology, the way Philip Morris has done. Yet given its size and interest in developing new products, it’s entirely possible Altria may develop an interest in cannabis.

Altria is the best-equipped company to take advantage of marijuana’s increasing legality. It owns a number of highly-profitable cigarette brands and enjoys very low capex requirements each year, due to the scale of its enterprise. Its financial resources are massive, and presently spends almost nothing on advertising, as tobacco products are restricted by law from most media.

In 2015, Altria generated $5.8 billion in operating cash flow and just $229 million in capex, translating into free cash flow of $5.6 billion. With such immense profits year on year, the company probably has more capital than any other potential player in the cannabis market and could potentially dominate as a marketer and distributor.

In light of future declining cigarette sales, it seems natural for Altria to broaden its activities into other, similar sectors. Altria getting into the cannabis game seems like a no-brainer.

Insys Therapeutics (Nasdaq: INSY)

Along with Big Tobacco, another sector worth looking into for emerging marijuana-related stocks is pharmaceuticals. Weed’s big break came in the medical sector, as marijuana emerged as a popular and effective treatment for a host of ailments, from pain relief to depression, anxiety and glaucoma.

While not a marijuana stock per se, Insys Therapeutics is on the cutting edge of the emerging trends in medical marijuana research and development. The company has two drugs approved by the US FDA, named Subsys and Syndros.

While the first drug is a high earner for the company, it has little to do with cannabis. But Syndros is a pharmaceutical variety of THC (tetrahydrocannabinol) the active ingredient in marijuana. In March it cleared a federal regulatory hurdle in the U.S. and could likely launch later this year.

The company has been quite successful marketing these products, and looks set to invest some of its significant cash flow (it had $236.7 million in-hand at the end of 2016) into new research and development of cannabis-related drugs.

A cloud hangs over the company, in that Subsys has been challenged by regulators and tied up with litigation. With sales of that drug falling, Insys has shifted to research and development.

Its share price has plummeted in recent years, but new cannabis-based sprays currently in development could bring the company back from its slump. One drug, a cannabidiol intended to treat childhood epilepsy, shows particular promise.

With strong activity in its development pipeline, Insys could be a strong performer in the field of medical cannabis-based products and a good earner for those investors able to take advantage of the current low share price.

GW Pharmaceuticals (Nasdaq: GWPH)

Towering above all other marijuana stocks with a $3 billion valuation and a strong earnings record, GW Pharmaceuticals is the biggest name in cannabis. A drug developer that specializes in cannabinoids, the company has its hands in a number of new developing products, including drugs aimed at epilepsy, infantile spasms, autism and schizophrenia.

One drug in particular should get cannabis investors excited. Epidiolex is an experimental product used in the treatment of childhood epilepsy. The drug has over-performed in clinical trials, with a reduction in seizures of 50 percent. With a success rate this strong, it seems possible that Epidiolex could see strong demand and even better sales once it’s introduced to the market.

While firms like Cannabis Wheaton look set to take Canada by storm, GW Pharma is best positioned to take advantage of the growing boom in medical marijuana and cannabis-related products inside the United States. It could see some competition from Insys, which as noted before is developing its own epilepsy treatment utilizing cannabidiol. There may not be room for two products boasting such similar pedigrees.

GW Pharma has an advantage in that it has a strong presence in the United Kingdom. The company plans to invest £50 million and hire 70 new staff for its Britain-based facilities. The company is well-positioned to take advantage of greater interest in medical-marijuana and cannabis-based products on both sides of the Atlantic.

Other companies to keep a close eye on in the space:

Beleave (CSE:BE): Beleave is a biotech company focused on the production of medical marijuana in Canada. Its wholly-owned subsidiary, First Access, applied for a pre-license inspection in March 2017.

Beleave became Cannabis Wheaton’s fifth production partner in May and the parties will work cooperatively to identify an appropriate second site to be acquired and developed by a newly formed special purpose subsidiary of Beleave ("NewCo"). The proposed second site is expected to be located in Ontario and will be designed to accommodate an estimated 200,000 square feet of cultivation space.

The company’s stock has fallen significantly in May, but has stabilized since. We currently see Beleave as one of the most undervalued growers.

CanniMed Therapeutics (TSX:CMED): CanniMed Therapeutics has been cultivating pharmaceutical cannabis for 15 years, and with this experience is it sure to be near the front of the pack when Canada’s cannabis boom comes into force.

On top of this, CanniMed has exposure to Australian markets and has recently signed a supply deal in South Africa, evidence of not only the company’s ambition, but also the quality of its contacts and product.

The limited downside and undeniable experience of this company should be enough for all investors to take a second look.

Harvest One Cannabis (CVE:HVST): Harvest One Cannabis Inc, formerly Harvest One Capital Inc, is a Canadian company focused on servicing both recreational and medicinal markets.

Harvest One recently raised $25 million in equity financing and $9 million will be used to finance Phase 1 production capacity expansion at United Greeneries’ Duncan Facility.

Harvest One has seen its share price increase in September and we think the company is well-positioned to take advantage of Canada’s looming legalization of recreational marijuana.

Moving forward, OrganiGram’s trajectory is sure to send the company far within the marijuana world. Poised to take a noticeable chunk of the pot market, OrganiGram is equipped with solid leadership and an ambitious drive that investors are sure to follow closely.

MedReleaf Corp (TSE:LEAF): As a licensed producer of cannabis-based pharmaceutical products, MedReleaf Corp has a head start on the coming boom in Canada. Early July has seen a bounce in the stock price, and investors may look to ride it upward from here. MedReleaf could become Canada’s second biggest medical marijuana company after Canopy Growth Cooperation as many analysts expect the ‘legal weed’ industry to grow 25 percent on an annual basis over the next 10 years.

MedReleaf has seen its share price fall since June, but has steadied out in recent months and could be poised for gains as the expected legalization of recreational marijuana materializes.

**IMPORTANT! BY READING OUR CONTENT YOU EXPLICITLY AGREE TO THE FOLLOWING. PLEASE READ CAREFULLY**

FORWARD-LOOKING STATEMENT. Statements in this communication which are not purely historical are forward-looking statements and include statements regarding beliefs, plans, intent, predictions or other statements of future tense. Forward looking statements in this article include that new cannabis legalizing legislation will create an $8-billion-dollar industry; that there will likely be a supply shortage; that this industry will be $25 billion annually in the US; that Cannabis Wheaton’s business model reduces risk for investors; the ability to generate revenue or take production through the streaming agreements. Forward-looking information is based on the opinions and estimates of Cannabis Wheaton at the date the information is made, and is subject to a variety of risks and uncertainties and other factors that could cause actual events or results to differ materially from those projected in the forward-looking information. Forward looking statements involve known and unknown risks and uncertainties which may not prove to be accurate. Actual results and outcomes may differ materially from what is expressed or forecasted in these forward-looking statements. Matters that may affect the outcome of these forward looking statements include that markets may not materialize as expected; marijuana may not turn out to have as large a market as thought or be as lucrative as thought as a result of competition or other factors; Cannabis Wheaton may not be able to diversify or scale up as thought because of potential lack of capital, lack of facilities, regulatory compliance requirements in Canada or outside of Canada or lack of suitable employees or contacts; partners of Cannabis Wheaton may not be granted licenses or additional capacity under existing licenses for them to grow for the cannabis market; and other risks affecting Cannabis Wheaton in particular and the cannabis industry generally. The forward-looking statements in this document are made as of the date hereof and the Company disclaims any intent or obligation to update such forward-looking statements except as required by applicable securities laws.

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