Pot Peripherals – Getting In On The Side Gig.

Peripheral vision it's what allows you to see objects all around you without turning your head or moving your eyes. What does this have to do with investing in cannabis stocks? Peripherals are other industries that can be indirectly impacted by the growth of the industry in focus. For example, when crypto-currency was all the rage, volatility reigned supreme. Many believed that crypto-currency was the wave of the future, and it very well might be, but speculation produced extremely high volatility and since then, the market for crypto has weakened immensely.

Smart investors saw an opportunity without the risk, as I did, and instead of getting emotionally caught up in the direct investment, decided to invest in the peripheral investment. What were those peripheral investments? CME Group (NASDAQ: CME), otherwise known as the Chicago Mercantile Exchange and CBOE Global Markets (NYSEMKT: CBOE). Both exchanges announced that they would begin trading futures in crypto-currency and this opened up an opportunity for an investor to participate in the mania without participating in the risk.

I bought shares in both companies and realized a 12.96% return from CME and a 7.00% return from CBOE before exiting my positions and the collapse of crypto-currency. On December 17, 2017 Bitcoin hit $19,379 and has sense retreated to $6,395.00 as of this writing. There are still opportunities in this space, if you want the risk and volatility, but for me, I have decided to move on.

The cannabis industry has the same opportunity in peripherals as did Bitcoin. However, CME and CBOE have yet to announce future contracts on cannabis crops. Not that I do not think that CME and CBOE will begin to see cannabis as a commodity, but for now, the peripherals I am talking about are found in infused drinks, edibles and oils.

Partnership with companies in other industries is a real possibility. Constellation Brands (NYSE:STZ) has been the first one to enter the market. Constellation, along with its subsidiaries, produces, imports, and markets beer, wine, and spirits in the United States, Canada, Mexico, New Zealand, and Italy. Constellation is in the beverages – wineries and distilleries industry. Although they are the first mover, many others in the beverage industry are looking to produce Cannabis infused beverages. Coca-Cola has been rumored to be in talks with Aurora Cannabis Inc. (NYSE: ACB).

New Age Beverages Corp (NASDAQ: NBEV) and Craft Brew Alliance Inc. (NASDAQ: BREW) are also in the hunt for cannabis infused drinks. It could be that they are positioning themselves for acquisition rather than a strategic partnership. I say that because the difference between Constellation Brands and New Age Beverage Corp. in terms of capitalization is enormous.

If an investor wants of participate in the potential profits of the industry without investing in a pure stock play, then finding a company that is looking to capitalize on the market and investing in it might be the best way to participate.

Most of the companies offering cannabis infused edibles are traded over the counter (pink sheets) and are considered penny stocks. Due to that, I will forego listing any of the stocks because I cannot, with good conscious, name any of these stocks. However, an investor can look at reputable companies such as The Rocky Mountain Chocolate Factory, Inc. (NASDAQ: RMCF) or the private company MC Brands, LLC. Rocky Mountain has not expressed any interest in entering the cannabis infused space and MC Brands is nothing but cannabis infused edibles.

Watching private companies, which are currently involved in the market go public or, watching public companies that currently do not have interest in the industry navigate the uncharted waters, could be profitable. However, playing the peripherals can be like shooting BBs into the ocean hoping to hit a lobster. In other words, picking a winner that might not exist yet is a very long shot. The peripheral play is a difficult call, but as the industry becomes more accepted and profitable, traditional companies will find it hard to stay out.

If you like the traditional company that you think might have a place in the cannabis industry, you could add it to your portfolio after conducting your due diligence. However, don’t add a position in a traditional company based solely on your belief that it may one day enter the industry. When adding any company to your portfolio, it is always wise to complete your due diligence and then wait for a buy opportunity on a market dip. So much more so when adding a pure stock play in cannabis or any potential partnerships and peripherals.