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We've been monitoring the situation with Marijuana legalization since a series of announcements by states such as Colorado legalizing Marijuana for medical and eventually recreational use. Our first article posed that Marijuana may be the next big growth sector. Then we researched the individual issues to try to narrow down the best from an overall portfolio of pot stocks. We've narrowed it down to Medical Marijuana (MJNA) and here's why:

1. Medical

The focus of this company is on the medical side, not recreational or a component industry like distribution. In states such as Colorado, medical Marijuana is legalized first. In addition to medical Marijuana, the company is developing non smoking technologies such as gums and other products that include THC. For people who truly want the THC for its medical benefits, this is a more clinical approach (vs. buying a bag of weed from a dispensary).

2. Patents

The company has an extensive patent portfolio that can be licensed to other companies producing similar products.

The company has patents in over 100 countries for its biotechnology medical delivery devices.

As we've seen with other industries, patents and licensing alone can be a great source of revenue.

3. Only company with revenue

Medical Marijuana (MJNA) unlike many of its competitors, actually has revenue.

Medical Marijuana, Inc. (MJNA), a leading cannabis and hemp industry innovator, recently announced its third quarter earnings. The company earned net income of approximately $1.19 million on gross revenues of $3.00 million for the quarter ended Sept 30, 2012. This represents a gross revenue increase of 1500 plus percent quarter-over-quarter when compared to revenue of $198,813 for the quarter ended Sept 30, 2011.

4. Not overvalued

Although the reason for the low stock price is the large amount of float, the price itself is low per share. It's accessible to more investors and has more room to grow. It's not overvalued, although as we've stated in previous articles, proper valuations of startups in new industries can be misleading.

5. Industry gaining support

In Pennsylvania, a state senator has proposed a Marijuana legalization bill.

State Sen. Daylin Leach, a Democrat representing Montgomery and Delaware counties, announced plans Tuesday to introduce legislation that would legalize marijuana in Pennsylvania.

He has two co-sponsors on the bill -- Democrats from Philadelphia and Pittsburgh -- and plans to introduce the bill within the next week for the 2013-14 legislative session.

Leach during the Legislature's 2011-12 session introduced Senate Bill 1089 to create a medical marijuana program, but the measure did not make it out of committee.

60 Minutes did a segment on the industry, showing to average TV viewers some of the professional business aspects of the industry. Shows like this are starting to spread knowledge of the trend to the mainstream. While the movement to legalize has a cult following, it still is not part of the mainstream culture.

The risks

MJNA is still a micro-cap, we are afraid to use the word penny stock. Investing in any company so early can be very risky. But the other advantage, it's possible to make a micro investment. Priced at .11 buying 1000 shares will cost only $110 - at most brokers the small commission would be 10% of the investment! So while the risks of investing in such small issues are fairly high, it is also possible to risk a very small amount of money. For retail investors who want to get a piece of the pot pie, or for fund managers that want exposure to this growth market, this makes MJNA attractive.

Comparison

We have looked at other pot companies such as Cannabis Science (CBIS) and others, with the purposes of picking one or two 'best' ones, which Medical Marijuana (MJNA) was the choice. However, in such a new industry there can be many factors that could cause this pick to be a poor choice. In other words there's a higher amount of chance in analysis of a new industry with potential legal and regulatory hurdles. So if it isn't necessary to pick one in particular, it would be wise to create a portfolio of pot stocks. Since we've been covering this industry we've seen many opinions and have been asked many times which one rises to the top. After reviewing company information and available information about the legalization situation, the best seems to be Medical Marijuana (MJNA).

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within 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.