U.S. Attorney General Jeff Sessions, the highest law enforcement official in the land, despises marijuana to the point where his remarks about pot resemble a trailer for the camp classic Reefer Madness. But despite his harsh rhetoric, the legalization of marijuana rolls on (so to speak).

However, there’s more to the marijuana industry than getting high or treating pain. Empirical evidence shows that cannabis also can be used to ease addictions, notably for tobacco. Below, I pinpoint a hot marijuana biotech that’s in the vanguard of developing addiction-reducing treatments.

First, a quick disclaimer: we’re not necessarily fans of Mary Jane and its normalization. As an investor, you should remain coolly dispassionate and leverage investment opportunities as they are, not as you wish them to be.

For example, no sane person is in favor of war, but from time to time, this newsletter recommends defense stocks. If you think cannabis is the devil’s weed (and that’s your right), tell your member of Congress or local editorial board. But if you want to make money from “canna-business,” read on.

The corner of High and Main…

I get a lot of inquiries from readers about potential pot stock investments. I’ve also gotten my share of anti-pot screeds. Marijuana investing is the most common subject in the weekly Investing Daily Mailbag.

Marijuana’s transformation from high-times rebellion to Main Street capitalism seems to hold an enduring fascination with my readers.

That’s why you should know that the U.S. Food and Drug Administration last week opened a large door to the moneymaking potential of marijuana as a cure for nicotine addiction.

On July 28, the FDA announced that it would attempt to encourage the development of low nicotine alternatives to conventional cigarettes, even as it takes a more conservative approach on other regulatory goals. In response to changing consumer behaviors and societal attitudes, Big Tobacco already is transitioning toward e-cigarettes (i.e., “vaping”) and smokeless, low-nicotine products.

The FDA’s elevation of low nicotine cigarettes as a regulatory priority is a surprising development, considering the Trump administration’s avowedly anti-regulatory, laissez-faire approach to industries of all types.

Marijuana is no longer a touchstone of the culture wars, nor merely a punchline from a hackneyed Cheech & Chong sketch. Marijuana is a multi-billion-dollar business that’s been growing by double-digit rates every year. The FDA’s announcement last week is particularly good news for 22nd Century Group (NYSE: XXII), a fast-rising biotech that bioengineers marijuana as well as tobacco plants for end uses that are perceived as socially valuable.

22nd Century’s proprietary technology seeks to slash levels of nicotine and other nicotinic alkaloids in the tobacco plant through plant breeding and genetic engineering. 22nd Century has the capability to make cigarettes with nicotine levels 95% lower than traditional cigarettes.

22nd Century (market valuation: $168.1 million) is a small-cap stock that’s nonetheless large enough to withstand the volatility and riskiness of canna-business, which is dotted with scores of unstable, indebted micro-caps that are likely to go out of business in coming months.

22nd Century occupies a sweet spot in terms of size: big enough to survive, small enough to generate the market-thumping gains that often elude Big Pharma. On June 26, the company officially joined the Russell Microcap Index.

As the FDA’s announcement last week showed, XXII is well-positioned to break out in a year that’s expected to be favorable for small fry stocks.

22nd Century also produces THC-free marijuana that’s in demand among farmers, medical scientists, and agricultural programs across the U.S. The company’s experienced researchers are now creating “enabling tools” that expedite the focused bioengineering of cannabinoid production in the cannabis plant, with the aim of creating new strains of industrial hemp plants with reduced levels of cannabinoids for new drug treatments and agricultural applications.

Among the company’s key initiatives is the development of a new strain of hemp containing zero THC, the main psychoactive compound found in cannabis. THC produces the “high” in the brain that earns marijuana its federal ban as well as lasting enmity from our nation’s attorney general.

Budding applications…

Low nicotine cigarettes would help smokers kick the nicotine habit, which some researchers say is just as tenacious as cocaine addiction.

The World Health Organization (WHO) recently published an Advisory Note titled Global Nicotine Reduction Strategy. The purpose of the data is to help health officials develop policies for limiting the sale of cigarettes to brands with a nicotine content that isn’t strong enough to cause or maintain addiction.

The WHO in its report determined that this goal could be reached with a 95% reduction in nicotine versus the conventional cigarette brands on the market today. This nicotine threshold dovetails perfectly with 22nd Century’s efforts, providing a powerful tailwind for the company.

At present, 22nd Century is the only company in the world capable of producing tobacco cigarettes at this extremely low level of nicotine, without having to use potentially harmful artificial extraction or chemical processes. The company can regulate the level of nicotine in tobacco plants without diminishing the elements of the tobacco leaf that convey characteristics such as taste and aroma.

The company’s technology is protected on a global basis by more than 200 issued patents and more than 50 patent pending applications, providing the basis for the company’s commercial product portfolio.

22nd Century recently announced that the FDA had provided positive feedback on the product the company is trying to bring to market to take advantage of the WHO mandate recommendations. Policy change implications aside, the company already is selling branded tobacco products in the U.S. The company’s products include Red Sun and Magic regular and menthol cigarettes and Spectrum government research cigarettes.

XXII sports a comparatively low total debt-to-equity ratio (most recent quarter) of 1.44, which sets it apart in a field of deeply indebted pot companies. The average analyst expectation is that 22nd Century’s year-over-year earnings growth will reach 25% in the current quarter, 33.3% next quarter, and 40% this year. The stock is up a whopping 68.7% year to date, with upward momentum that appears sustainable.

Got any comments or questions? Drop me a line: mailbag@investingdaily.com — John Persinos

Jim Fink’s money-making moment of truth…

Revelations come in many forms, not just from controlled substances. Jim Fink, chief investment strategist of Velocity Trader, told me about a personal moment of truth that forever changed his financial future:

“About 30 years ago I was walking in downtown Chicago, and I came across several of the pit traders who work at the Chicago exchange. Back then they used a technique on the trading floor leveraging a certain type of investment contract.

I met these guys and learned the secrets behind how these contracts worked. As it happens, I ended up becoming one of the first investors to use this technique on an online trading platform.

I’ve been using it ever since, and I’ve built a fortune by sticking with it week after week, year after year.”

Jim calls his investment methodology the Velocity Profit Multiplier system. As he explains:

“After years of study and experimentation, I’ve discovered that every single stock sends out hidden signals before it moves, and my system tracks these signals to find profitable trade opportunities.”

Editors Note: Jim Fink recently recorded a short presentation that explains the secrets behind his investing technique. This presentation is must-see viewing for any serious investor. Click here to watch it now.