Investing in marijuana stocks is a tricky business in many ways. While all types of investing carry a degree of risk, marijuana is a brand-new industry and these new companies do not have any historical data to access their worth. And there are also a wide range of regulatory fears and concerns that make the market extremely volatile, as well as the fact the marijuana is actually looked at by the Federal government an illegal Schedule 1 substance. It must also be noted that the majority of marijuana companies are all running on a deficit and are not making any cash, eagerly awaiting regulatory deadlines.
The Top “Marijuana” Company
The top performing company of 2017 is known as 22nd Century Group, a plant biotechnology company. Shares of this company are so far up 90%. But what is unique about 22nd Century Group is that 22nd Century Group has genetically engineered cannabis plants to contain no THC (the psychoactive component in marijuana which gives it all its special qualities), which qualifies it to be lumped into the general category of marijuana stocks. However, the company’s primary focus is on tobacco. The company’s primary claim to fame is that it has genetically engineered tobacco plants to have much lower levels of nicotine than ordinary tobacco plants.
Two events served as key catalysts for the stock explosion. First, the U.S. Food and Drug Administration announced sweeping plans to reduce tobacco-related disease and death last July. A key component of this plan is to require tobacco companies to lower nicotine levels in cigarettes to non-addictive levels. The announcement brought much delight to shareholders of the company, who had already done just that in a stroke of enormous fortune. The company claims to be the only one able to produce non-addictive tobacco at the current time. A license agreement between 22nd Century Group and British American Tobacco was terminated, allowing the small biotech to explore opportunities with other companies. 22nd Century Group has indicated that multiple companies in the tobacco and pharmaceutical industries have expressed strong interest in teaming up with it.
The second catalyst for 22nd Century Group was the recent announcement of preliminary results from a clinical study evaluating approaches to lowering the addiction levels of cigarettes. These results found that an immediate reduction to very low nicotine levels in cigarettes was the best pathway to reduce harmful effects from smoking. 22nd Century Group’s very-low-nicotine cigarettes were used in the study.
Not so Fast
Profits of the company have plunged in recent weeks for a number of reasons, but none that are of too much concern. One is that the company announced a stock offering of a lower price that the actual shares were trading for, and the newly issued shares were always going to dilute the share price. However, many are saying that the price of the share plunged lower than either of these two variables, meaning that it is very possible that some investors decided to take some profit from the exchange. 22nd Century Company is currently trading at $2.19 at the time of this writing and even if this stock does not retain its top position at the end of 2017, it still has massive potential and its share price is likely to go up. Plant technology is an area that is going to boom and 22nd Century Company has a foot in both the marijuana and tobacco fields, as well as a large pile of cash and interest from a number of high profile companies and investors. It is placed in an ideal position and it is actually good news for investors that the price is low. It means that the upside will be bigger when it regains its levels.
While it may not see the enormous 90% returns again, it is definitely a safe stock and a deal with some of the companies who are said to have expressed interest could send the stock shooting once again. In the minefield of marijuana stock investing, 22 Century Company is as safe as it gets. The bigger threat to many marijuana companies is not any individual faults, but a systemic upset to the industry, such as a federal crackdown or a drop in the price of marijuana across the board due to oversupply. This will wipe out a lot of marijuana companies, but not 22nd Century Company. It is based in both marijuana and tobacco, and is sitting on enough cash to sustain itself for 5 years (or so it says)
With regard to the marijuana side of this stock, it’s too early to know how much potential there could be. Industrial hemp farmers could benefit from plants genetically engineered to have low THC levels. Medical marijuana growers could drive demand for cannabis plants with high cannabidiol (CBD) levels. For now, though, 22nd Century Group’s primary appeal for investors will continue to be with its tobacco technology.