If You Think Cannabis is all about Getting Stoned…You’re High!

With all the recent headlines surrounding the Cannabis craze it becomes important for investors to understand exactly what the fuss is all about. Listening to the market pundits, it becomes apparent that there is a lack of knowledge about the industry, and even less knowledge about the potential for future investments.

Yes, we’ve all heard about the marijuana dispensaries and the gummy bear edibles. Everyone, over the age of 21 understands the nature of intoxication, but the Cannabis industry is much more than getting stoned, it’s potentially a $500B business…Maybe larger!

The hemp market is the 1,000-pound gorilla in the cannabis industry as regulation changes and adoption increases. This isn’t just another industry for investors, it is a paradigm shift which happens once or twice in a generation.

Let’s understand that there are two basic strains of cannabis: Sativa and Indica. Hemp, which is a derivative of the Sativa strain has very little THC and will likely be a legal crop after eighty years as an illegal substance. This plant creates the potential for significant industrial disruption with over 50,000 uses. Ironically, until the cotton gin was invented, hemp was the crop of choice for the colonists in the ‘new world ‘as trade centered around the need for rope and textiles. The Southern cotton barons fought to make it an illegal crop, and it’s been that way ever since.

Of the hundreds of different cannabinoids found in the cannabis plant, CBD, or cannabidiol, is the most common. It goes through an extraction process which can turn the isolate into a 99.5% pure powder. Unlike THC, CBD can be used with no psychoactive high (Which is extracted out much like decaffeinating coffee) leaving the benefits without the side effects. The effects of CBD have been analyzed for years. Clinical studies show that THC primarily influences CB1 receptors in the brain, while CBD’s effects are seen on CB2 receptors which creates anti-inflammatory, anti-anxiety and, in many cases, pain-relief. Imagine, with the opioid epidemic at crisis levels a natural solution to alleviate the problem.

The CBD isolate can be used to help wide range of conditions including fibromyalgia, arthritis, diabetes, alcoholism, MS, chronic pain, schizophrenia, PTSD, sleep disorders, nerve pain, depression, epilepsy and other neurological disorders. University systems are presently going through clinical trials using the isolate and other various properties of the plant with the Pharma industry watching very closely. These markets alone are projected to be nearly $50 Billion in annual revenue.

Global demand for CBD is driven by the blending of pure CBD Oils and Isolate powder into a broad range of consumer products on an unprecedented scale. Certain industry use cases for CBD isolate are well documented such as the pet food industry, personal hygiene products, paper and textiles even as a beverage, but technology has led to other uses for the plant which are astonishing. One good example is plastics.

Plastics made from hemp are becoming a global necessity. They are bio-degradable and can have a positive net impact on landfills. Hemp cellulose extract is used to make cellophane, rayon, celluloid and a range of related plastics. Due to their high strength, hemp composite bioplastics are highly sought after for use in products ranging from cars and ships to cellphones…The biggest problem for manufactures are the legal implications of purchase, price certainty and available, quality supply.

Another excellent example of the industrial use case for hemp in the creation of construction materials. Hemp is the basis for the creation of Hempcrete a strong, lightweight, breathable, non-toxic, energy efficient building material which delivers excellent insulation while being water and flame resistant. The hempcrete market can be one of the largest supplementary uses for the plant which was never conceived, yet its use, in an eco-conscious world, will be impactful.

The Department of Justice has told us that they do not 'seek to control cannabinoids,' and that only cannabinoids derived from marijuana (e.g., flowers and resins of a cannabis plant above 0.3% THC) are controlled under the Controlled Substances Act. CBD is not a controlled substance if derived from hemp especially after it gores through he extraction process. The Drug Enforcement Agency issued an instruction to federal agencies that cannabinoids are not controlled substances, and that the 'mere presence of cannabinoids in any product or derivative does not render it a controlled substance.’

So, the next time you see one of the cannabis stocks in the headlines, ask yourself: “What products in my life can be disrupted by Cannabis?” If you sit and do the analysis, you’ll be amazed. If you think Cannabis is all about having a good time, think again.

Jack Bouroudjian is the Chief Economist of UCX, a CNBC contributor and Advisor to the RxMM Group.

@JackBouroudjian