I’m sure you’ve seen signs of the budding cannabis industry popping up left and right.
I think most people see full legalization as a matter of “when,” not “if.” But still, it’s not easy for most folks to figure out which cannabis stocks will be big winners.
Look for cannabis companies with valuable intellectual property. As the industry booms, these players will be positioned well to earn handsome royalties on their IP assets.
Imagine for a minute that you somehow owned the patent to cannabis seeds — not one particular strain, but all cannabis seeds.
Your company, “KingCanna Seeds LLC,” may or may not want to actually grow cannabis. After all, it is a lot of work.
Though, you’re certainly willing to enter into licensing agreements with cannabis growers around the world, so long as they agree to pay you a royalty on each cannabis seed they plant…
You want to grow my seed into premium organic flower? Fine, just pay me a royalty.
You’re growing my seed into outdoor flower for extraction? Fine, pay me a royalty.
You want to grow hemp for CBD? Great, just pay me my royalty.
This would be an ideal enterprise. You could just kick back on a beach in Jamaica and watch that royalty money roll in.
The Next Best Thing?
You can’t own the rights to all cannabis seeds. But there are several opportunities for enterprising companies to inject their patent-protected technologies into the cannabis supply chain. This establishes lucrative, royalty-based revenue streams for years to come.
One avenue is what you can think of as “high-tech agriculture” techniques. For instance, there’s an established biotech company who’s developed proprietary non-GMO tissue culture technology. It’s “designed to enable rapid production of clean plants with product consistency and reduced phytosanitary risk.”
Basically, any technology that can help producers grow cannabis plants more efficiently, more cheaply, or of higher quality, will be incorporated into best-practice growing processes. And the owner of that technology will be able to monetize it as the industry’s adoption and growth gains momentum.
Another avenue is biosynthesis.
How do I explain biosynthesis? It’s a geeky topic.
Currently, almost all “extract” products are just that… chemical components, like THC and CBD, that are extracted from a grown cannabis plant. There’s nothing wrong with this process. But it does take a good deal of time, effort, and money. And biotech geeks have found a better way.
Biosynthesis is a process that produces cannabinoids, including CBD. It produces them by means of natural, biological processes… but it completely bypasses the cannabis plant altogether.
Essentially, scientists have figured out how to introduce the DNA components that code for CBD into yeast. It then “grows” the CBD molecules that everyone’s interested in. Molecules that are identical to the CBD that’s currently extracted from grown cannabis plants.
Biosynthesis Is The Future
I know. This sounds like something from a Sci-Fi movie. And I’m sure Bob Marley would be rolling in his grave if he heard how his beloved cannabis plant was getting bypassed for its now-yeast-grown components.
But even as unnatural as it may sound, I’m convinced that biosynthesis is the future. And will quickly be adopted as the fundamental platform for the mass commercialized production of cannabinoids.
Biosynthesis won’t kill all plant-growing operations. There will always be a market for flowers, which have to be grown. But the THC and CBD that goes into vape pens, edibles, drinks, lotions, and pharmaceuticals… that’s all fair game for biosynthesis.
It’s simple economics. If a vape-pen manufacturer can buy biosynthesis-produced CBD for $1, or extraction-produced CBD for $1.50, they’ll choose the former every time.
All told, biosynthesis should be able to produce higher volumes, with better consistency, and at lower costs than traditional extraction methods currently allow. And that makes companies with intellectual property critical to biosynthesis especially interesting investment opportunities.
I’ve homed in on one particular company in this space for the cannabis “seed investment” portfolio I’ve been building — more on that to come.