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Marijuana Stocks: Headed Higher?

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The Green Rush may be upon us. Cannabis investment research firm ArcView estimates that legal North American marijuana sales hit more than $8 billion in 2017, up 22% from the year before. What’s more, the firm expects annual sales to grow by 27% per year through the end of 2021, reaching $22.6 billion at that point. Investors have begun speculating accordingly – the ETFMG Alternative Harvest ETF (MJX), an exchange-traded fund that invests in marijuana stocks, has returned 14% since mid-December.

Driving much of the speculation: our neighbors to the north. Canada, where medical marijuana is already legal, is expected to legalize and regulate pot for recreational use by July. The market for legal pot is growing stateside as well. Twenty-nine states and the District of Columbia have legalized marijuana for medical purposes, and nine states and D.C. allow recreational marijuana use.

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However, pot still is illegal under federal laws, and the Justice Department has said it plans to crack down on users of the drug. This legal gray area has made dealing with U.S. cannabis growers and distributors a dicey proposition for financial institutions and investors alike. For now, the most-promising weed stocks in the U.S. are pharmaceutical companies exploring the viability of cannabis as a treatment for several disorders.

Marijuana stocks of any stripe are risky. Many Canadian pot distributors have no earnings to speak of, and share prices measured in relation to sales are at nosebleed levels. Marijuana’s use in medicine still is in its nascent stages. And, like internet and computing companies of old, it’s difficult to know which outfits will have staying power amid shifting regulations and unpredictable consumer demand.

But make no mistake: Demand for legal cannabis is rising, and the growth prospects for firms that can meet it are tantalizing. Risk-tolerant investors who want to go green can consider these stocks.

SEE ALSO: 50 Dividend Stocks You Can Count On

Data is as of Feb. 7, 2018. Companies are listed in alphabetical order. Currency is U.S. dollars, unless otherwise noted. Click on ticker-symbol links in each slide for current share prices and more.

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