Some people may envision the legalization of marijuana as an opportunity for someone like Philip Morris to start selling marijuana cigarettes. It’s much closer to the truth to say that marijuana is showing potential for medical uses, and companies that are developing medical applications for the plant stand to gain in the marketplace.

The rush to get in on the marijuana craze has created hundreds of startups. The odds are that many of these will fail. The winners so far are established companies that are adding marijuana to their focus. Even the winners have seen drops in price lately.

We have selected four marijuana stocks that have the potential to make significant gains. These stocks were chosen based on their array of marijuana-related products. These products are either in use or awaiting FDA approval. All figures are current as of August 4, 2017.

1. AbbVie Inc. (ABBV )

This is a pharmaceutical company that is ahead of the pack because it has a cannabis-based drug on the market. The FDA approved Marinol, which helps alleviate nausea or vomiting for chemotherapy patients. The drug also helps AIDS patients who have lost their desire to eat.

It is important to note that Marinol is not the AbbVie’s flagship drug. In fact, it is not even the company’s biggest seller.

ABBV has reported increasing revenues in the past four years. In addition, its operating income has been increasing steadily. The company is benefiting from a host of useful drugs, including Marinol. This is a way to play the marijuana trend without incurring 100% exposure to the plant.

The risk of owning AbbVie is that it concentrates almost exclusively on United States markets. Most pharmaceutical companies market internationally. If the domestic market falters, ABBV could see a drop in value. For investors, this risk is offset by the dividend, which is nearly 4%.

  • Avg. Volume 5,587,270
  • Market Cap 112.983B
  • EPS (TTM) 3.86
  • Dividend & Yield 2.56 (3.62%)

2. Scott's Miracle-Gro (SMG)

An interesting way to play the marijuana boom is Scotts Miracle-Gro. Known for its lawn and garden-care lines, the company is developing products for cannabis growers and also several pesticides for use on marijuana plants.

The stock had been in a sideways pattern since December 2016 then dropped sharply from around $97 to nearly $83 per share. This looked like a base that could be the foundation for a breakout, but instead the stock dropped. Now it looks to be moving up again.

Revenues were down dramatically for the quarter ended April 1, 2017, but the company's income was up. Nevertheless, given the volatility in price recently, this could be one to watch instead of one to buy for now.

  • Avg. Volume 512,507
  • Market Cap 5.77B
  • EPS (TTM) 4.66
  • Dividend & Yield 2.12 (2.22%)

3. Corbus Pharmaceuticals (CRBP)

This stock has seen some dramatic ups and downs over the past year. Hopes rise and fall for its marijuana-based drugs, which are in clinical trials. Resunab, which is designed to treat sclerosis, has had promising trials.

The stock has tended to dip just before trial results are announced, then rally when the results are positive. Now Corbus is testing Resunab as a treatment for cystic fibrosis. The pessimism/optimism pattern will continue to play out as this drug is tested yet again.

The company has negative operating income, and revenues are close to zero. Corbus is a company depending on the success of a single drug that could make or break it.

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  • Avg. Volume 621,206
  • Market Cap 301.31M
  • EPS (TTM) -0.57
  • Dividend & Yield N/A

4. Insys Therapeurtics, Inc. (INSY)

Although this company markets many non-cannabis drugs, it is in the process of developing a synthetic cannabis drug to treat childhood epilepsy. The company is working on a spray technology to deliver pharmaceutical cannabinoids.

INSY has had flat revenues for the past three years, but its operating income showed a sharp drop at the end of 2016, as the company spent more on research. Gross profit is higher than it was three years ago. The stock has fallen from $15 per share, but watch for it to find support at $10 per share.

There has been more volatility than a prudent investor would usually want to see, but given that this is a biotech stock, the action is acceptable.

  • Avg. Volume 606,184
  • Market Cap 721.3M
  • EPS (TTM) -0.02
  • Dividend & Yield N/A

The Bottom Line

As people sober up about the marijuana craze, the reality of using it in medicines and other products will set in. Like any other source for drugs, cannabis has positive prospects and some failures. The drop in share price for some marijuana stocks indicates that the companies need to deliver on the promise of medical cannabis soon.

It is best not to invest based on enthusiasm over marijuana, and keep a level head about actual results from drug trials. The pesticides angle is interesting, but such a product would have limited sales until marijuana is legalized nationwide.

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