Trump's Anti-Pot Stance Won't Hurt This 'Canna-Business' Stock

President Trump's socially conservative administration has vowed to crack down on marijuana, but here's why pot investors shouldn't worry.
By John Persinos ,

Two recent political developments appeared to signal serious setbacks for the legalized marijuana industry. Investors ran for cover, casting doubt on the future viability of "canna-business."

Below, we explain why these fears are unwarranted and pinpoint one marijuana stock in particular as the best growth investment in the "green rush."

First, let's examine the political Sturm und Drang in Washington and why it signifies less than you might think.

Last week, White House Press Secretary Sean Spicer linked the booming marijuana industry to opioid addiction and vowed that the Trump administration would crack down on pot. Days later, Attorney General Jeff Sessions on February 28 attacked legalized pot, in front of a gathering of state attorneys general. The vehemently anti-marijuana Sessions thundered:

"Marijuana is a cure for opiate abuse? Give me a break. This is the kind of argument that has been made out there. It's almost a desperate attempt to defend the harmlessness of marijuana or even its benefits. I doubt that's true. Maybe science will prove I'm wrong, but at this point in time, you and I have a responsibility to use our best judgment, that which we've learned over a period of years, and speak the truth as best we can."

Fact is, science already has proven Spicer and Sessions wrong. Empirical evidence suggests that marijuana can actually help curb opiate addiction. Regardless of the cultural biases of certain members of the political class, the marijuana business is a multi-billion-dollar juggernaut that's unstoppable. Investors in marijuana's huge potential shouldn't be dissuaded by temporary rhetoric.

The fact is, after a series of ballot initiatives and legislative actions in states throughout the country, more than half of America now has the right to imbibe marijuana. Hyperbole from Spicer and even Sessions won't reverse all of those marijuana-friendly laws and regulations.

Which brings us to GW Pharmaceuticals (GWPH) - Get Report , a UK-based biopharmaceutical company that's the best-of-breed stock to profit from the fast rise of the medicinal marijuana industry.

Lots of over-hyped penny stocks have sprouted up in the canna-business space and you should be wary of them. GW Pharmaceuticals is a far more stable marijuana company, however.

With a market cap of $3.26 billion, GW Pharmaceuticals is the largest independent company in the medical pot industry. The company develops and markets much-needed cannabinoid prescription medicines, which means that it probably would continue to sell its products even if there is a push-back against recreational marijuana use under a Trump administration.

The company's chief product is Sativex, an oromucosal spray for the treatment of multiple sclerosis, cancer pain and neuropathic pain, ailments for which doctor's are urgently seeking non-opioid solutions. GW Pharmaceuticals has a partnership with German-based giant Bayer (BAYRY) - Get Report for the distribution of Sativex in the UK. GWPH offers another cannabis-based product, Epidiolex, for the treatment of epilepsy.

Unlike most of its peers, GWPH boasts a solid balance sheet with plenty of financial wherewithal. As of September 2016, the company held cash and cash equivalents of £374.4 million ($483.4 million) compared to £234.9 million during the same period last year. GWPH's Quick Ratio (cash versus financial liabilities) of 5.96 is strong.

The company also differs from most marijuana companies in that it faces solid growth prospects. The average analyst expectation is for the company to post year-over-year earnings growth next year of 28.2%.

The stock has risen 16.15% year to date and 55.86% over the past 12 months. GWPH shares now hover at about $129.30; the average analyst one-year price target is $154.44, for a gain of nearly 20%.

Also keep in mind, Big Pharma players such as Pfizer (PFE) - Get Report , Novartis (NVS) - Get Report , and Merck (MRK) - Get Report are starting to make forays into medical marijuana, which means a company such as GW Pharmaceuticals could be a takeover target. A buyout of GWPH would richly reward the company's existing shareholders.

How should you play medical and other stocks in March? Here's what Jim Cramer and four of our top columnists recommend.

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John Persinos is an analyst with Investing Daily who at the time of publication owned none of the stocks mentioned.

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