Cannabis / Marijuana, STAFF NEWS & ANALYSIS
Australia Pops 'Pot Stocks' on News of Legalization
By Daily Bell Staff - October 27, 2015

Medical cannabis fuels new sector …There's a flurry of activity in the 'farm to pharma' sector. A pot stock boom looks set to sweep the Australian sharemarket after plans to legalise medical cannabis, with a host of ASX-listed companies fast-tracking their moves to enter the market. Australia's first listed medical marijuana company, MMJ PhytoTech, which merged with Canadian grower MMJ Bioscience in a $15.5 million deal in March, will announce on Friday that it has raised $2 million from a Spanish fund to launch its Australian operations, adding to its businesses in Europe, Canada and Israel. And MGC Pharmaceuticals, which raised $2.7 million earlier this year, will also announce on Friday the appointment of renowned cardiologist and media commentator Dr Ross Walker as a director and appoint him to chair a strategic advisory board to evaluate the commercial opportunities of medical cannabis in Australia. – Australian Financial Review

Dominant Social Theme: Pot stocks? Sounds worse than penny stocks. Will never happen!

Free-Market Analysis: Well, it's happening, as we can see from this article. So let the deal-making begin. It's like any other deal-making, only the deals are cannabis deals, and that's just how it should be, given that the sector is likely maturing even more quickly than expected.

The proximate cause of this Australian equity boom arises from a recent federal decision to allow cannabis to be grown for medical purposes. This in turn led to an upward move for "pot stocks" listed on the ASX.

What investors obviously know in Australia is that they are witnessing the beginning of a significant new sector that may mimic the dotcom boom of the late 1990s.

Those who understood the significance of that sector and got in early had the chance to obtain significant wealth. Many dotcom stocks later failed, but during the mania itself, early investors may have minted money.

We saw the same insights at work in Canada, after the recent victory of the Liberal Party there. New Prime Minister Justin Trudeau intends to legalize cannabis and the Ottawa Sun reported that "the markets reacted … dramatically on the morning after Canadians elected a Liberal majority government." In fact, the word used in connection with at least one cannabis stock was "skyrocket."

As with cannabis, those who participated in early-stage dotcom companies, pre-offering – and who chose wisely – generated significant profits post-IPO. Certainly, there is a possibility here that multi-million dollar fortunes can be made once again.

Daily Bell Chief Editor Anthony Wile has written about this in his most recent book, Financial Freedom – The High Alert Way to Discover Winning Investment Ideas. The book focuses in part on sector investing and how if one can anticipate a positive sector rotation, the possibility for profits may be significant. The book can be downloaded for free with a subscription to The Daily Bell's free newswire.

Certainly, as we can see, the cannabis sector is a "live" marketplace. Obviously, expectations are running high as Australia creates the regulatory conditions that will allow for medical marijuana sales.

In fact, that may happen rapidly. Following the court decision, Victoria will become the first state allowing cannabis to be legally grown to treat such conditions as "cancer, multiple sclerosis, HIV/AIDS, epilepsy and chronic pain."

The article quotes media commentator Dr. Ross Walker as saying: "We are talking about what I think is going to be one of the next big things in medicine…I would say that we are probably one to two years away from cannabidiol being mainstream …. For a lot of these conditions we are talking about people who are either in terminal pain or their life has been made a misery by chronic pain …"

MGC Pharmaceuticals may be a big initial player in the budding industry, according to reports. MGC took over Erin Resources this year in order to convert the gold miner into a "cannabinoid resin producer for cosmetic products." The company intends to consider medical cannabis as well. Dr. Walker is hopeful that MGC will commit to a large footprint when it comes to cultivation in Australia, which presumably would further legitimize the business.

MMJ PhytoTech is a "farm to pharma" cannabis producer that grows the plant and converts it into various commercial products including pills and capsules. The company is working with law firm Piper Alderman to gain licensing for the Australian market and Victoria.

Australia is just the latest significant entrant into the fast-legalizing cannabis industry. In Mexico, the Supreme Court of Mexico will consider a proposal that would move the country toward legalization of recreational cannabis. The hearing is currently scheduled for October 28th.

In Canada, as already mentioned, the Liberal Party made enough electoral gains to allow Prime Minister Trudeau to move ahead aggressively with plans to fully legalize cannabis. Trudeau's initiatives are, in fact, important to his larger agenda. Taxes from cannabis legalization are expected to fund some of Trudeau's social and infrastructure initiatives.

In the US, Democratic candidate Bernie Sanders was quoted in reports around the country after he stated he would be "open" to legalizing cannabis. The remark was delivered on comedian "Jimmy Kimmel's" late-night TV program.

Sanders said, "I am not unfavorably disposed to moving toward the legalization of marijuana. We have more people in jail today than any other country on Earth. We have large numbers of lives that have been destroyed because of this war on drugs, and because people were caught smoking marijuana and so forth. I think we have got to end the war on drugs."

In a recent interview at The Daily Bell, John Knapp, Chief Operating Officer for PharmaCielo Ltd., said, "The cannabis revolution has reached the point of no return. So get ready to inhale because there's a big cloud of profitable smoke coming our way."

Investors obviously have high hopes for the "whitening" cannabis industry. It is early days yet, but the sector is obviously attracting significant attention and will garner more attention still as decriminalization and legalization continue. The UN's UNGASS conference on drugs next year, which will be attended by all 193 member states, will further boost the cannabis opportunity.

After Thoughts

The Daily Bell has covered this developing industry from the start and has continually delivered cutting-edge insights about where it is headed. To keep up with the latest developments please subscribe to The Daily Bell Newswire. It's free, but it's packed with information you don't want to miss.

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