Just a few years ago, if someone suggested that you could make big profits —legally — by investing in marijuana, you probably would have responded: “What the heck are you smoking?”

But today, marijuana is increasingly legal around the world. And it’s becoming big business. Medical marijuana treatments are netting profits for pharmaceutical firms large and small. On the recreational side, pot profits are more than, well, a pipe dream.

Which brings us to India Globalization Capital (NYSE: IGC), a small-cap stock with big-cap dreams. Based in Bethesda, Maryland, this developer of cannabis-based medical treatments recently made moves into the cannabidiol-infused energy beverage market.

India Globalization Capital’s stock price saw a massive 500% jump following the company’s announcement in September 2018 that it would offer cannabis drinks, temporarily pushing its market cap to $295 million. But days later, as investor euphoria wore off, the stock plunged. IGC’s valuation currently hovers at only $90 million.

IGC’s roller-coaster ride is a prime example of the potential riches, but huge risks, of investing in the cannabis industry. Will IGC stock spike again in 2019? Or does the company pose a danger to unsuspecting investors? Let’s take a deeper look.

In this edition of Mind Over Markets, we will discover:

• What is India Globalization Capital?
• How has IGC stock performed in 2017/2018?
• Should you buy IGC stock in 2019?
• Should you sell IGC stock in 2019?
• Our overall forecast and outlook for IGC in 2019.

Let’s get into it!

What Is India Globalization Capital?

India Globalization Capital started as a legacy infrastructure business consisting of heavy equipment rental, real estate management, and commodities trading.

However, the company recently diversified into cannabis pharmaceuticals. It’s developing cannabis-derived products for the treatment of Alzheimer’s, pain, nausea, eating disorders, Parkinson’s, and epilepsy in humans, dogs, and cats.

How Has IGC Stock Performed?

IGC has registered extreme volatility since it went public in May 2005. For most of its existence, the company has traded under $1.00 per share.

On October 2, 2018, the price of IGC’s stock reached a peak price of $14.58. Since then, the stock has tumbled to about $2.50, a dizzying decline of 82.8%.

• Over the past 12 months, IGC gained 408%, compared to a gain of 1.6% for the S&P 500.
• Over the past two years, IGC gained 758.6%, compared to a gain of 19.3% for the S&P 500.
• Over the past five years, IGC gained 207.4%, versus a gain of 46.3% for the S&P 500.

How Has IGC Performed in 2017/2018?

• In 2017, IGC gained 244.8%, versus a gain of 19.4% for the S&P 500.
• Year to date in 2018, IGC has gained 112.8%, vs. a loss of 2% for the S&P 500.

It was in the autumn of 2018, with IGC’s announcement that it would offer branded marijuana drinks, that the company’s stock hit the stratosphere and caught the imagination of Wall Street.

IGC said it had entered into distribution and partnership agreements for several products that include the healthy properties of hemp-derived cannabidiol. According to research firm Mordor Intelligence, the global energy drinks market generated $55 billion in annual sales in 2017 and is projected to grow at a compound annual growth rate of 3.7% from 2018-2023. IGC plans to tap into this bonanza through new products such as its “Nitro G” branded energy drink.

In the three months preceding the announcement, the stock of IGC rocketed a whopping 2,571% based on these expectations. In September 2018, the company completed an offering of 5.65 million shares. The company says it will use the proceeds of the offering for the sales and marketing of new cannabis-fused drinks.

Who Are IGC’s Rivals?

The marijuana industry has attracted several “Big Pharma” players that dwarf IGC. These major drug firms are pursuing cannabis-based medicinal treatments that offer huge rewards, but marijuana only plays a small role in their overall business operations.

To gauge IGC’s more direct competitors, we must look to small-cap companies that have the potential to dramatically move the needle in stock performance. As such, the following three pot stocks aren’t for risk averse investors.

22nd Century Group (NYSE: XXII)

With a market cap of about $329 million, this biotech focuses on genetic engineering and plant breeding and is developing a new strain of hemp with zero THC, the main psychoactive compound found in cannabis (the compound that produces the “high” that’s keeping marijuana illegal on a federal basis in the United States).

22nd Century Group also is creating genetically engineered tobacco plants with 97% less nicotine than conventional strains, as well as a strain high in nicotine that allows for the lowest tar-to-nicotine ratio in the cigarette industry.

The low-nicotine variety has proven effective in helping smokers kick the habit. 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.

INSYS Therapeutics (NSDQ: INSY)

This biotech (market cap: about $479 million) is developing pediatric epilepsy treatments. INSYS has other products in the pipeline that could boost its shares exponentially if they receive approval.

INSYS is developing cannabis-derived drugs for easing opioid dependence and moderate-to-severe pain. The company already has received approval for Dronabinol, an orally delivered solution that eases nausea and vomiting associated with chemotherapy and AIDS.

Zynerba Pharmaceuticals (NSDQ: ZYNE)

Zynerba is developing transdermal synthetic cannabinoid treatments for both pediatric and adult epilepsies.

With a market cap of about $85 million, Zynerba could witness explosive growth. However, because it’s lagging in the regulatory approval process, Zynerba is particularly risky.

Will IGC Go Up in 2019 (Should You Buy)?

IGC enjoys several powerful macro-economic tailwinds. Government policies also are lining up in its favor.

On October 17, 2018, Canada became the second country, after Uruguay, to legalize possession and use of recreational cannabis for all adults. Medical marijuana has been legal in Canada since 2001.

Canada has left it to the provinces and municipalities to determine parameters, such as where cannabis can be bought and consumed.

In the U.S., marijuana remains illegal on the federal level. However, individual states can adopt their own legal standards for marijuana thanks to Congress, which prohibits drug enforcement agents from pursuing marijuana growers and users in states where pot is legal.

Read Also: Cannabis Science Stock Prediction

In the U.S. to date, 30 states and the District of Columbia have legalized marijuana to some degree.

The following chart, compiled with data from the Marijuana Business Factbook, shows the explosive growth in marijuana sales:

These estimates are on the conservative side. According to Ameri Research, the global legal marijuana market will reach 2024 revenue of $63.5 billion.

As this video explains, technological advancements are changing the marijuana business, helping to bring pot to the masses:

No surprise, then, that IGC’s revenues have grown substantially over the past year, racking up year-over-year revenue growth (most recent quarter) of 245.1%. But what about profitability?

Will IGC Go Down in 2019 (Should You Sell)?

It’s important to consider IGC’s checkered past. To quote those avatars of marijuana use, The Grateful Dead: What a long, strange trip it’s been.

In its most recent quarterly report, the company posted a loss of $0.51 million and its expenses exceeded revenue. The company’s profit margin stands at -59.1%.

Perhaps most troubling of all, IGC has a dubious history with regulators.

IGC went public on May 13, 2005, an initial public offering spearheaded by entrepreneur Ram Mukunda, who has since served as chairman of the board, CEO and president.

Mukunda was previously founder and CEO of a company called Startec Global Communications, a firm that went bankrupt in 2001 after defaulting on a $9.6 million interest payment.

Over the past three years, IGC has received nine late-filing notices from the New York Stock Exchange, compelling the U.S. Securities and Exchange Commission to repeatedly ask IGC’s management when they would comply with securities rules and file the requisite financial statements.

IGC eventually caught up on its filings and issued its annual report and 10K on June 21, 2018, narrowly avoiding a NYSE delisting. That’s a red flag. IGC also has a history of abruptly changing auditors — that’s another red flag.

Read Also: GW Pharmaceuticals Stock Prediction

Overall IGC Forecast and Prediction for 2019

IGC is risky, volatile and probably poised for another tumble.

The company seems to have devoted scant resources (about $150,000 a year) to actual medical research. No money has been devoted to clinical studies to seek U.S. Food and Drug Administration approval.

The marijuana industry is rife with dangerous penny stocks. Many of these overly hyped companies are good at issuing press releases and enriching insiders, not actually producing profits. Many pot stocks are pump-and-dump schemes that burn investors.

To be sure, the “green rush” in marijuana is very real and profits await investors who pick the right pot stocks. India Globalization Capital, however, is not one of those stocks. It’s a toxic investment that you should avoid.

Among small marijuana stocks, those big, headline-grabbing gains usually go up in smoke.

John Persinos is the managing editor of Investing Daily.