Happy 420! Here's How To Invest In Legal Marijuana

Happy 420! Even though marijuana is not legal at the federal level, those interested in taking part in Wacky Weed Day's festivities can do so through investing.

On Wednesday, Benzinga's PreMarket Prep hosts Joel Elconin and Dennis Dick were joined by Alan Brochstein, the "420 Investor," who shared some interesting ways to become involved in the ever-developing pot story.

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Brochstein was asked what derivative businesses would benefit from the legalization of cannabis and if he could provide any investment ideas on the byproduct.

Brochstein responded, "I think a lot of people fall into the oversimplification of cannabis. That, okay, well if you are going to invest in cannabis, you're going to invest in a dispensary or you're going to invest in cultivation."

Related Link: Want To Invest In Marijuana? Look To Canada

"There's so much more to the industry," Brochstein shared. "They call it the ancillary part […] you're not actually directly involved in cannabis. And one of the weird things about the publicly traded market is that there are very few companies that are actually directly involved in the cannabis industry. Most of publicly traded stocks, except for in Canada […] In the United States, the stocks are pretty much relegated to the ancillary."

Brochstein elaborated on the ancillary aspects of the cannabis market, "Some of the areas I like in ancillary would be compliance software – and there are no publicly traded stocks that I'm aware of – but any sort of company that can help producers and retailers remain compliant. You know, it could even be a packaging company."

He also mentioned how investing in certain energy stocks could provide exposure to the marijuana market. "One of the big problems with cannabis […] when you grow it indoors, which it doesn't have to be the case, but tends to be the case – when you grow it indoors, it uses a lot of energy." Within that subsector, Brochstein likes Serna Inc SRNA.

Brochstein also highlighted the potential of testing facilities that look at the genetics of different strains of the plant.

PreMarket Prep is Benzinga's morning show for traders and investors. It airs live with live chat feature here from 8–9:30 a.m. ET, and is posted as a podcast here.