5 Stocks Heading ‘Higher’ on Legalized Marijuana

by Alyssa Oursler | November 7, 2012 12:38 pm

Still-President Barack Obama undoubtedly celebrated his Election Day victory with a few hugs from his family, maybe an upscale libation.

But voters in at least a couple states were probably partying just a little bit harder.

Colorado and Washington made history Tuesday as the first states to legalize the recreational use of marijuana for adults 21 and older. While the drug remains banned under federal law, the news still was a major victory for herb aficionados in those states, as well as supporters of the broader legalization movement.

Of course, potentially also joining in the festivities last night were a number of companies who shill products catering to the stoner crowd, and whose wares could come into even more demand now that weed will be a little easier to score.

Here are five such stocks that could be headed higher on legalized marijuana:

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Yum! Brands

More recreational marijuana use will lead to more recreational munchies. So surely the brass at Yum Brands (NYSE:YUM[2]) — owner of Taco Bell and Pizza Hut — are wringing their hands in glee.

Taco Bell’s menu already targets college kids and others with late-night cravings but light wallets, and the Doritos Locos Taco — marrying the fabled snack chip with its dirt-cheap tacos — could be the ultimate draw for newly unchained smokers.

Pizza Hut wins out, too, but really, so do pizza joints as a whole. (After all, they deliver.) Expect Domino’s Pizza (NYSE:DPZ[3]) leadership to be cheering a little today. And you know Peyton Manning[4] is smiling — he invested in 21 Papa John’s (NASDAQ:PZZA[5]) franchises in the Denver area shortly before the marijuana amendment was passed.

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PepsiCo (NYSE:PEP[6]) is another food company that could make bank off the munchies.

If you’ve seen Half Baked, you can’t think about weed without quickly thinking about Funyuns[7]. Well, PepsiCo’s Frito-Lay division makes ’em … and it makes Doritos, Tostitos, Cheetos, Lay’s, Ruffles, Fritos and a host of other bagged-snack favorites!

That said, again, investors have options. Mondelez International (NASDAQ:MDLZ[8]) — the snack side of the former Kraft — has options for stoners with a sweeter tooth, providing nibbles like Oreos, Chips Ahoy and Nutter Butters.

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Urban Outfitters

Those discovering (or upping) their marijuana use after the new referendum might want to look the part, too.

Step one: Get an artsy tapestry for your pad — maybe with a bright variety of colors or with Ganesh on it. Urban Outfitters (NASDAQ:URBN[9]) is the place to go for this — and for cool, hipster apparel that will complete the persona of newly discovered weed-lovers.

More options: Buckle (NYSE:BKE[10]) — while best-known for its jeans — could get a boost, as it carries a few drug rugs along with edgy brands like Obey. Pacific Sunwear (NASDAQ:PSUN[11]) and Billabong (PINK:BLLAY[12]) also fit the bill.

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All those stoners are going to need a soundtrack to jam out too, man. Thus, the businesses behind laid-back tunes could see a bump with more folks lighting up.

Dave Matthews Band — whose fans have earned a certain reputation — is on the RCA label, which is owned by Sony (NYSE:SNE[13]). Sony also distributes music by O.A.R.

Meanwhile, Phish and The Grateful Dead (more classic stoner bands) belong to labels owned by Time Warner (NYSE:TWX[14]).

There’s also Vivendi‘s (PINK:VIVHY[15]) Universal Music Group — owner of Bob Marley’s Island Records label.

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Johnson & Johnson

Sure, many adults are going to sit back, take a few hits, then sit around the rest of the night watching Netflix (NASDAQ:NFLX[16]) or playing Xbox. But those who want to go out and about after smoking won’t want red eyes giving away their recreational activity.

Enter Johnson & Johnson (NYSE:JNJ[17]), maker of trusty ol’ Visine. Just a few drops, and you’re good as sober.

As of this writing, Alyssa Oursler did not hold a position in any of the aforementioned securities.

  1. Compare Brokers: https://investorplace.com/options-trading/broker-center/
  2. YUM: http://studio-5.financialcontent.com/investplace/quote?Symbol=YUM
  3. DPZ: http://studio-5.financialcontent.com/investplace/quote?Symbol=DPZ
  4. Peyton Manning: http://espn.go.com/nfl/story/_/id/8553736/peyton-manning-invests-21-denver-papa-john-pizza-shops
  5. PZZA: http://studio-5.financialcontent.com/investplace/quote?Symbol=PZZA
  6. PEP: http://studio-5.financialcontent.com/investplace/quote?Symbol=PEP
  7. Funyuns: http://www.youtube.com/watch?v=9fXFY8VLMXs
  8. MDLZ: http://studio-5.financialcontent.com/investplace/quote?Symbol=MDLZ
  9. URBN: http://studio-5.financialcontent.com/investplace/quote?Symbol=URBN
  10. BKE: http://studio-5.financialcontent.com/investplace/quote?Symbol=BKE
  11. PSUN: http://studio-5.financialcontent.com/investplace/quote?Symbol=PSUN
  12. BLLAY: http://studio-5.financialcontent.com/investplace/quote?Symbol=BLLAY
  13. SNE: http://studio-5.financialcontent.com/investplace/quote?Symbol=SNE
  14. TWX: http://studio-5.financialcontent.com/investplace/quote?Symbol=TWX
  15. VIVHY: http://studio-5.financialcontent.com/investplace/quote?Symbol=VIVHY
  16. NFLX: http://studio-5.financialcontent.com/investplace/quote?Symbol=NFLX
  17. JNJ: http://studio-5.financialcontent.com/investplace/quote?Symbol=JNJ

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