Opponents of legalized marijuana say it will make the nation lazy and worthless.
But for many companies, the legalization of weed would be a massive business opportunity. Other companies would be decimated.
Legalization could also be a tax windfall.
NORML, a pro-marijuana legalization group, estimates that the industry could yield $1.2 billion per year for just one state’s, California’s, taxpayers through a proposed 50% tax on the drug.
Harvard’s Jeffrey Miron estimated that a legalized marijuana industry comparable to the alcohol industry would generate up to $14 billion in tax revenue nationally each year.
Rationale: Drug trafficking-fuelled violence across the Mexico border should decrease when marijuana is legalized.
Play: Short an arms maker like Smith & Wesson (SWHC).
Rationale: Marinol, the prescription pill-version of the appetite stimulant found in THC, which also reduces nausea and vomiting, will be redundant.
Play: Short Solvay Pharmaceuticals (SOL), the company that sells Marinol.
Rationale: Cigarette companies may commercialize filtered 'joints,' marijuana cigarettes, or 'spliffs,' mixed marijuana-tobacco cigarettes. 'Marb greens,' anyone?
Play: Long Philip Morris (PM).
Rationale: Some people will drink less if they are given the option of legal marijuana.
Play: Short alcohol companies, like the Anheuser-Busch Companies (BUD)
(And here's some proof that the alcohol companies know the legalization means decreased profits for them - they're trying to kill the competition. Last week California Beer and Beverage Distributors made a $10,000 contribution Sept. 7 to Public Safety First, the main coalition opposing Prop. 19.)
Rationale: 'Stoners' like to play video games. (As an aside, they also like to watch TV, so you might also go long Time Warner Cable)
Play: Game-makers and video game software-makers like Nintendo (NTO, of the Wii), EA (ERTS), and GameStop (GME).
Rationale: Medical marijuana, legal in some states (like California) is prescribed to treat depression. If marijuana is legalized, patients who take prescription pill versions of anti-depressants, like Prozac, may opt to supplement or replace their treatment with marijuana.
Play: Short Eli Lilly (LLY), the company that makes Prozac.
Rationale: Cigarette companies own a lot of farmland in North and South Carolina. Land which marijuana-growers might look to acquire will increase in value.
Play: Go long RJ Reynolds (RJR), a cigarette company (the maker of Camel) that owns land in North and South Carolina.
Rationale: Farmland will probably be bought in order to grow marijuana. Real estate near these areas should increase in value as marijuana-growing communities emerge and prosper.
Play: Invest in real estate near fertile farmland, like northern California (Mendocino county, for example), North and South Carolina.
Rationale: Paranoia, a side effect of smoking, could spark greater interest in 'safe havens,' where investors who think the world might end look.
Play: Gold (SPDR), farmland
Rationale: Smokers will be hungry for 'munchies.'
Play: Pepsi (PEP) and KFC (YUM), and McDonald's (MCD), for example, are good bets for popular providers of munchies.