FORTUNE — The increasing social and legal acceptance of marijuana has some investors wondering about ground-floor opportunities in an industry that seems poised to become huge. And there might be some, but only for the stouthearted.
Despite being legal in one form or another in nearly half the states, the federal government still classifies marijuana as a Schedule I narcotic, putting it in the same criminal league with heroin. This, of course, is lunacy, but it’s impossible to guess when the feds might get sane. So for the time being, risk and uncertainty abound, and many well-established firms, such as banks, accountants, and suppliers, are skittish about working with marijuana-oriented businesses, be they medical-marijuana clinics or big, well-capitalized biotech outfits who might be coming up with the next wonder drug. That leaves their costs higher and their futures cloudier. For now, most public companies are in their nascent states, and some are downright marginal.
There are a few exceptions. This week, Morgan Stanley initiated coverage of GW Pharmaceuticals (GWPH), a British biotech firm that trades on the Nasdaq. On Tuesday, Morgan Stanley set a price target of $103, sending shares zooming up by about 40% from their closing price the day before of $46.04. Then, after CNBC host Jim Cramer sweatily enthused about the company, shares zoomed even more, for a total appreciation of about 60%, to $72.48. “It’s not a medical marijuana stock,” Cramer yelled. “They have a novel platform. It is an epilepsy company.” As of Friday morning, shares were trading at just over $69.
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Contra Cramer, GW actually is a medical marijuana stock, sort of. Its whole business is based on cannabinoids, chemical compounds found in marijuana and hemp, as well as in the human body. They can also be produced synthetically. The company’s main product, Sativex, was developed to treat symptoms of multiple sclerosis, cancer, and neuropathic pain. Another product, Epidiolex, is presumably what caused Cramer to dub GW an “epilepsy company.” It’s aimed at alleviating the symptoms of that disease in children. The company is also researching drugs to treat type-2 diabetes.
GW is “the most legit” marijuana stock available to investors, concluded Jeff Reeves, the editor of InvestorPlace.com. But that hardly makes it a sure thing. It’s still a biotech company in its early stages.
From there, it’s a pretty steep drop-off to the other public companies that are based on marijuana. Many of them trade for pennies, and they tend to be as opaque and problematic as any other penny stock. Which, if any, are likely to emerge as real players in the pot business is impossible to tell.
The Benzinga 420 Marijuana Index has fallen by more than 50% since its peak in March, largely thanks to regulator action against a couple of companies. Some of the deflation might also be due to a realization that, despite the legalization of pot in many states for either recreational or medical use, it will be a long time before the industry is stable.
Shares in GrowLife (PHOT), which sells products and services to marijuana growers, resumed trading on Friday after the SEC had halted trading for two weeks. The stock proceeded to plummet by 60% before recovering slightly. The SEC cited “questions that have been raised about the accuracy and adequacy of information in the marketplace and potentially manipulative transactions in PHOT’s common stock.” The company’s market cap as of Friday morning stood at $185,000. It lost $21 million in 2013 — and yet before the SEC action, it was considered one of the most stable companies in the industry.
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In late March, the SEC also halted trading for several days in Advanced Cannabis Solutions (CANN), a Colorado company, due to questionable stock-trading activity among “affiliates and shareholders.” The company noted that executives’ shares were locked and complained that the action posed “a major inconvenience.” ACS leases space and equipment to marijuana growers and offers consulting and support services. The fact that it’s one of the more stable companies in this space (which isn’t saying much) doesn’t mean its stock is stable: It has fluctuated wildly this year, starting off at $3.25 and reaching a high in February of $48.38. On Friday morning, it was trading at $15.
Cannabis Science (CBIS), another ostensibly pharma-focused firm, is in the “development stage.” On Friday morning, the stock was priced at $0.103 per share, giving the company a market cap of about $78,000. Cannabis Science released its 2013 annual report on Wednesday in which it expressed “substantial doubt about our ability to continue as a going concern.” Not surprising, given its accumulated deficit of more than $87 million and its reported revenue over the preceding eight years of $126,000. An investor who is short on the stock offers a scathing look at the company at Seeking Alpha.
Among the 27 stocks on Benzinga’s 420 index, GW stands nearly alone as a truly stable, well-capitalized firm. It seems that, for now, the further you get from companies that deal in pot qua pot, the safer you are.
That will doubtless change soon, as attitudes quickly evolve. On Thursday, National Public Radio reported that retired Supreme Court Justice John Paul Stevens, 94, is calling for legalization of marijuana, comparing the situation to the prohibition of alcohol in the 1920s and 1930s. “I think in time that will be the general consensus,” he said. For investors, it’s a question of how much time.
