Pot is quickly evolving from an illicit, counter-cultural activity into mainstream capitalism. The long-sought normalization of marijuana laws is becoming a reality among an increasing number of states, spawning a huge multi-billion-dollar industry that's attracting a "green rush" of entrepreneurs, venture capitalists and individual investors.

The time to invest in the nascent and fast-growing marijuana industry is now, before it matures and the barriers to entry for companies and investors get pricier. Below I pinpoint the best investment play on this rare opportunity. This marijuana stock is among a group of promising investments with enormous room for multi-year growth.

According to the latest research from ArcView Group, a cannabis industry investment firm based in California, legal marijuana is the fastest-growing industry in the U.S. ArcView reports that the U.S. market for legal cannabis grew 74% in 2014 to $2.7 billion, up from $1.5 billion in 2013. If legalization spreads to all 50 states, marijuana could generate more annual revenue than the organic food industry. Fueling the trend are states that covet the billions in tax revenue.

The decades-long propaganda war on the cannabis plant produced generations of Americans who grew up convinced that marijuana was the "devil's weed" only used by society's misfits and criminals. That's all changing, as marijuana legal reform sweeps the country.

The use, possession, sale, cultivation, and transportation of marijuana is illegal under federal law, but Uncle Sam has announced that if a state wants to pass a law to decriminalize cannabis for recreational or medical use it can do so. As of this writing, 23 states and the District of Columbia currently have laws legalizing marijuana in some form.

The turning point occurred in 1996, when California voters agreed to allow patients and their caregivers to possess and cultivate marijuana for therapeutic purposes. Known as the California Compassionate Use Act, Proposition 215 created the country's first open marijuana market. Prop. 215 spawned a flurry of state legalization laws, both medical and recreational, that have made possible a new industry.

As marijuana evolves from shady practice to big business, a plethora of entrepreneurs are cashing in, not only by growing and selling pot but by creating branded edibles, "marijuana tourism," vaping parlors, paraphernalia, dispensaries, seeds, fertilizers, hydroponic equipment, trade shows -- you name it.

Here's the rub: most of these companies are small, under-capitalized and extremely risky. But after scrutinizing a host of marijuana stocks, I've found the best of the bunch: G.W. Pharmaceuticals (GWPH) .

GWPH Chart GWPH data by YCharts

Based in the United Kingdom, this pharmaceutical company discovers, develops, and markets cannabinoid prescription medicines. The company's primary product is Sativex, an oromucosal spray for the treatment of multiple sclerosis, cancer pain and neuropathic pain.

With a market cap of $1.41 billion, G.W. Pharmaceuticals is one of the very few "weed companies" that isn't a micro-cap, penny stock. It's among certain high-momentum stocks that are set to take off in 2016.

To be sure, the company this month reported a fourth-quarter fiscal 2015 (for the three months ended Sept. 30) loss of 85 cents per share. But this result was much narrower than the consensus estimate of a loss of $1.38. The company's $28 million operating loss shrank to a $18.5 million net loss in the period.

Also, it's important to note that much of this loss stems from the company's heavy investments in future growth. Research and development (R&D) expenses in the quarter were up 93.5% year over year to $38.5 million.

The company also has successfully launched several stock offerings this year to boost its balance sheet and finance its growing portfolio of marijuana-based medicines.

As a result of robust R&D, the company has other promising cannabinoid products in various early and mid-stage clinical trials for the treatment of several diseases and mental disorders, including diabetes and schizophrenia. The company expects to release results from those trials within the coming year. Any successes should cause the stock to soar.

The stock has currently earned from analysts four "Buys" and 2 "Strong Buys," with no Sells or Holds. The stock now trades at about $67, with a one-year target among analysts of $150, for a whopping projected gain of 124%.

There's a significant need for new painkilling medicines and cancer treatments that mainstream pharmaceutical giants such as Johnson & Johnson and Merck & Co. aren't meeting. That's why the marijuana investment "buzz" belongs right now to G.W. Pharmaceuticals.

G.W. Pharmaceuticals is a momentum stock for 2016, but I've also found a small-cap tech stock that has the potential to surge 100% or more in the coming months. This is a growth story with major momentum, so it's important to learn the full details as soon as possible. The stock is trading under $8 a share, and its long-term prospects have never been better, making it a great value. I expect this rocket could take off soon, so be sure click here now and learn more.

 

John Persinos is editorial manager and investment analyst at Investing Daily. At the time of publication, the author held no positions in the stocks mentioned.

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