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I have a great front-row view of this industry, as Colorado was one of the earlier states to legalize marijuana. Making money on marijuana (cannabis with high content of intoxicating THC) and hemp (cannabis that contains low content of THC) will be very difficult.

You don’t want to own growers. There is a good reason why pot is called weed – it is a weed. You cannot name us a single company that is the best and most profitable parsley, basil, or cilantro grower, and for good reason – it is a commodity. Though there are temporary abnormal profits to be captured when growing cannabis, it is restricted and tightly zoned. Once marijuana is more widely legalized and zoning laws are loosened, capitalism kicks into high gear and excess profits get squeezed out of the system. There is no competitive advantage that can be achieved and then sustained in growing cannabis.

Then there are the medical applications – the stories we hear make you want to consume CBD (hemp extract) for breakfast, lunch, and dinner. But handicapping winners and losers in that space is very difficult – a few listed companies trade at astronomical, dotcom-like valuations. If there are medical benefits from pot or hemp extracts, pharmaceutical companies, which have plenty of experience in conducting clinical trials, marketing, and bringing medicine to consumers, will be the ones to profit. This space looks just like dotcoms in the ’90s: A few companies will succeed, but they’ll only be obvious with the benefit of hindsight. Most stocks, simply due to their astronomical valuations, will end up having a date with their maker.

Finally, you have branded recreational products. This is where the money is going to be made. There is not much difference between marketing recreational pot and cigarettes. Again, you cannot name a wealthy tobacco grower, because tobacco, just like marijuana or hemp, is a commodity. All the value in cigarettes is captured by branded cigarette companies.