The search for marijuana related stocks has been a huge trend across the investment community. Marijuana stocks such as Medical Marijuana (OTCPK:MJNA), Cannabis Science (OTCPK:CBIS), Medbox (MDBX.PK), Hemp Inc. (OTCPK:HEMP), Mediswipe (MWIP.OB), Growlife Inc. (OTC:PHOT), Rapid Fire Marketing (OTCPK:RFMK), and Terra Tech Corp (OTCQX:TRTC) among others are the popular stocks at the moment. The problem with getting into these stocks is that the potential upside is already reflected in their valuation.
Many investors, myself included, would argue that these stocks are ridiculously overvalued due to the "green hype" and those looking to get into the "green rush." The valuations are especially alarming as virtually every marijuana related stock has negative earnings, causing astute investors to look to alternatives that do not have the hype valued into the share price. One such alternative is a diversified holding company called Acorn Energy (NASDAQ:ACFN). Let me explain.
The rapid acceptance of marijuana among voters has caused widespread decriminalization and legalization laws across the country. This has caused a surge in marijuana cultivators to meet this booming demand. Decreased penalties, and in some cases, legal status for some growers also factors into the increase in the number of cultivators.
Electrical grids were designed decades ago with fixed capacities per neighborhood or area. As many of you can imagine, high scale grow operations require massive amounts of electricity compared to an average household. The density of marijuana growers in many areas is staggering, especially in California and Colorado, as they are leaders in this movement. The resulting spikes in energy demand are causing neighborhoods to use more power than their electrical grids can provide, in turn causing transformers to blow up. The necessary repairs cost roughly $10,000, an expense that electrical providers obviously want to avoid. The solution is smart grids such as Gridsense.
Gridsense is a subsidiary of Acorn Energy, which makes a product called Transformer IQ. Transformer IQ provides inexpensive wireless monitoring of transformers thus enabling electrical companies to see if a neighborhood's demand for electricity is rapidly increasing (i.e. more growers moving in). With the implementation of a Transformer IQ, electrical companies can recognize demand outpacing the capacity in advance, allowing them to increase capacity before their transformers explode.
The concept is currently being proven with an order of 500 Transformer IQ monitors that was made on August 8th 2012 by one of the largest utility companies in California. I believe Acorn Energy will have a larger follow-up order from this California utility provider as well as new orders as this technology becomes widespread. In conclusion, I believe investing in Acorn Energy is a more reasonable way to get exposure to the marijuana boom than the "current list" of marijuana stocks.
Disclosure: I have no positions in any stocks mentioned, but may initiate a long position in ACFN over the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.