On January 2013, marijuana stocks reached records high following Colorado's launch of the first legal U.S. sale of marijuana. Investors were quick to take advantage of the new market.
According to a report from AFP, ArcView Market Research found that marijuana is moving towards being a $10-billion a year industry by 2018. After all, legalising marijuana could bring snatch cash away from illegal traffickers - bringing in cash to shareholders.
In Colorado alone, the legal marijuana market is at $1.44 billion and estimated to reach $2.34 billion by the end of 2014.
"Gains will come in the form of increased demand in existing state markets, as well as from new state markets coming online within a five-year horizon," the study said.
However, in August, the Financial Industry Regulatory Authority warned against marijuana stocks scams like trader "pump and dump" schemes.
"One low-priced stock now claiming to be in the medical marijuana business has had four name changes in the past 10 years," FINRA said.
For analysts at Motley Fool, there are only two marijuana stocks to bet on despite the industry being risky - the GW Pharmaceuticals and Medbox.
These two companies showed impressive market caps and share prices higher than other companies.
GW Pharmaceuticals is a British biopharma company which developed cannabis as base medicines for drug-resistant childhood epilepsy, Dravet syndrome, Lennox-Gastaut syndrome and multiple sclerosis spasticity. The most known brand from GW Pharmaceuticals is Savitex which is being sold to 11 countries. Its brand Epidiolex is also showing big market potential as it treats pediatric epilepsy. The drug will be in its late-stage trial by 2015. The company is also developing drugs for diabetes treatment and ulcerative colitis.
"In sum, GW offers perhaps the richest population of clinical candidates based on marijuana derivatives in the industry, making it a stock to watch," author George Budwell wrote.
Medbox on the other hand makes vending machines that dispense drugs, including medical marijuana. The stock hit a high of $73.90 per share in 2013.
Medbox had been poster child to "momentum stocks" in anticipation of the legalisation of marijuana in Colorado. But its share price remained valued at an average of 100 times. It may still be finding its way out from a big valuation gap after ending 2013 with less than $1 million in cash and cash equivalents, the company still has more potential compared to other marijuana stocks.