Marijuana has been legally available in Colorado for recreational use since 2014, and consumers' appetite for marijuana products continues to grow due to the launch of new products, including concentrates and edibles. During the first six months of 2018, cannabis concentrate unit sales skyrocketed 94.6%, and edibles unit sales jumped 13.8% year over year. As a result, Colorado's annual marijuana sales surpassed $1 billion in August -- the earliest it has ever achieved that milestone.

If Colorado's cannabis market is any indication, the future is bright for companies participating in markets, including California and Canada, that legalized marijuana for adult use this year.

The numbers that matter

There's been some debate over how much money would move from the black market to regulated markets following legalization, but Colorado's experience suggests it's substantial.

In its first year of legalization, Colorado reported almost $684 million in marijuana sales. Last year, Colorado's full-year marijuana sales were a record $1.5 billion, and based on August's $1.02 billion in year-to-date sales, this year's total will be even higher. Matt Karnes of GreenWave Advisors estimates that marijuana sales in Colorado this year could reach $1.6 billion.

Year Total Marijuana Sales 2014 $683,523,739 2015 $995,591,255 2016 $1,307,203,473 2017 $1,507,702,219 2018* $1,022,245,511 *Year to date through August

Colorado's marijuana market growth is particularly impressive because prices per gram of marijuana have fallen because of overproduction, and monthly average pounds of flower sales to consumers only increased 1.4% year over year in the first six months of this year.

According to Colorado's Marijuana Enforcement Division, the state cultivated an average of 40,656 more plants per month in the first half of 2018 than one year ago. The increasing availability of marijuana has driven prices per pound of marijuana bud down from nearly $1,300 at the start of the year to less than $800 this summer. Therefore, the uptick in marijuana sales this year is mostly the result of growing adoption of products that use marijuana as an ingredient rather than dried marijuana.

The increase in marijuana sales is also good news for Colorado's taxpayers, who have seen the state's coffers expand by hundreds of millions of dollars since legalization. So far this year, Colorado has pocketed more than $200 million in taxes from the sale of legal weed.

Bigger markets mean bigger opportunities

Marijuana is still illegal federally, but increasingly more states are passing pro-pot laws, and countries outside the U.S. are warming up to marijuana legalization.

In the U.S., the biggest market to approve recreational marijuana so far is California. California was the first state to legalize medical marijuana, and heading into recreational legalization this past January, more than 1 million Californians held medical marijuana licenses. The size of the legal marijuana market could eclipse $5 billion in the coming year, according to BDS Analytics.

California's market could eclipse estimated recreational marijuana revenue in Canada next year. Canada became the first of the G7 countries to open a recreational market nationwide this month, and according to Deloitte, recreational sales there could exceed 4 billion Canadian dollars in 2019.

California and Canada only hint at the global market opportunity associated with marijuana, though. Constellation Brands (NYSE:STZ), a leading beer, wine, and spirits company, paid $4 billion for a 38% stake in Canopy Growth (NYSE:CGC) earlier this year. According to its management, the retail market for pot and products containing cannabis could exceed $200 billion in 15 years.

What it means to investors

Unfortunately, most U.S. marijuana stocks trade on the lightly regulated over-the-counter, or penny stock, market, and that's unlikely to change until Washington, DC, gets on board with legalizing it nationally. Until then, investors have to be willing to take on the risk of either buying stocks over the counter or buying Canadian marijuana companies.

Until recently, investing in Canadian cannabis companies meant buying them on the Toronto Stock Exchange or buying American depositary receipts (ADRs). ADRs are stocks that represent a specified number of shares in a foreign company that trade over the counter.

Because many investors, including institutional investors, don't buy shares on the over-the-counter market, Canadian companies are increasingly shifting from the over-the-counter market to the Nasdaq and New York Stock Exchange. Cronos Group (NASDAQ:CRON) and Canopy Growth uplisted their shares to the Nasdaq and New York Stock Exchange, respectively, earlier this year. Aurora Cannabis (NYSE:ACB) is slated to begin trading on the NYSE next week, and Aphria Inc. (NASDAQOTH: APHQF) filed to list on the NYSE this week.

Buying shares in Canadian marijuana stocks won't give you exposure to the U.S. market, though. They've all decided to forgo the U.S. market until it becomes legal federally, so investors will have to turn to the over-the-counter market if they want to benefit from sales growth in places like Colorado and Canada. Although many over-the-counter stocks are risky, one that might be worth considering is KushCo Holdings (OTC:KSHB), a marijuana supplies company.

KushCo markets marijuana packaging and other ancillary supplies in the U.S., Canada, and elsewhere. Because packaging is highly regulated, this company has been able to carve out an important niche. Last quarter, its sales jumped 173% year over year to $12.9 million, but because of spending growth, it reported a net loss of $2.17 million in the period. The company's $400 million market cap means it isn't a cheap stock on traditional valuation metrics, but if it can keep itself at the forefront of its market and sales in California, Canada, Colorado, and elsewhere continue climbing, then it could be worth tucking away in long-term growth portfolios.