The legal cannabis sector is no longer the “Wild West”-style marketplace it was back in, say, 2013, but there’s still plenty of volatility compared with the placid broader markets.

Then again, that’s precisely why the right pot stocks reward forward-thinking investors with triple- and quadruple-digit gains.

In fact, there’s a bevy of micro- and small-cap companies, any one of which could be the next mega-cap blockbuster – the long-sought-after “Starbucks of weed” or “Facebook of pot.”

But I don’t want to leave anyone with the impression that the only way to make a killing on pot stocks is to buy small, volatile companies; the gains from my Scotts Miracle-Gro and GW Pharmaceuticals recommendations prove that just isn’t the case.

This company, for instance, isn’t likely to quadruple your money, but you’ll likely see double- and even triple-digit gains, and it pays a dividend that puts you way out ahead of inflation and low interest rates, too.

What’s more, all kinds of small legal cannabis companies are beating a path to its door for help with a very tricky problem…

This Was a “Watershed Industry Moment” for Pot Stocks

USA Today enthusiastically hailed Microsoft’s (MSFT) June 2016 move into the legal marijuana business. I was excited, too.

No, the Redmond, Wash.-based tech juggernaut won’t be marketing stony edibles or any potent new strains of weed.

It won’t touch so much as a seed. It’s all about the partnerships.

Rather, Microsoft has jumped in on the software side of the cannabis sector, partnering with a Calif.-based startup called Kind Financial to help ensure cannabis companies stay inside the legal lines.

You see, Microsoft is working with Kind’s “Government Solutions” division to make available to state and local governments the software they need to develop ways to track compliance.

As I’ve noted before, this is particularly important to the cannabis sector. The legalization trend represents a bold social sea change away from nearly 90 years of prohibition. So strict compliance is a way to make legal weed safe for consumers in a regulated marketplace and palatable to “law-and-order” types in governments and legislatures.

And compliance is strict: In some jurisdictions, failing to cross a “t” or dot an “i” opens the door to heavy fines and legal sanctions.

For its part, Kind (which created the actual software that Microsoft is about to begin selling) “offers a range of products, including ATM-style kiosks that facilitate marijuana sales,” according to The New York Times.

The software its created will allow governments and entrepreneurs a way to monitor the distribution of cannabis “from seed to sale” and ensure compliance.

David Dinenberg, Kind’s CEO, told USA Today that “thanks to Microsoft’s huge reach, it’ll be easier for us to target every state with our compliance solutions. It’s a win-win for both of us as more states look to legalize medical marijuana.”

This is about more than keeping weed companies on the straight and narrow, though…

This Is Where Cannabis Goes Mainstream

Microsoft’s entry here is as significant from a symbolic standpoint as it is from a purely financial and business point of view.

In one swoop, Microsoft has done nothing less than legitimize the cannabis trade in the eyes of many.

Matthew A. Karnes, an advisor to the cannabis industry, told the Times that “it’s very telling that a company of this caliber is taking the risk of coming out and engaging with a company that is focused on the cannabis business.”

Kind’s Dinenberg was even more hopeful: “I would like to think that this is the first of many dominoes to fall.”

There are signs that other major companies recognize that marijuana is moving into the mainstream… and marijuana investing into the “big time.”

For example, Oracle Corp. (NYSE: ORCL) is working with the state of New York to help administer its Medical Marijuana Program.

And in May 2016, the world’s largest drugstore chain, Walgreens Boots Alliance Inc. (Nasdaq: WBA), published a 650-word blog post exclusive about medical marijuana.

Titled “What Is Medical Marijuana? Clarifying Clinical Cannabis,” the post went on to answer common questions about medical marijuana and even told readers what to do to if they wanted to obtain it.

It’s easy to read that blog as an opening gambit in what could become an all-out effort on the part of Walgreens to eventually lobby for the right to dispense cannabis.

But Microsoft has stepped forward publicly and unambiguously. It is now well into its first year as a player in the legal marijuana trade, and a fixture in our Roadmap to Marijuana Millions legal cannabis portfolio.

The company will begin by marketing the software to government employees, but hasn’t ruled out marketing through dedicated cannabis events. The Microsoft logo flying proudly at a conference packed with marijuana growers and distributors would be a huge leap forward for the industry.

The Cloud Can Take Pot Stocks to the Next Level

The software that Microsoft will market uses the company’s Azure platform, which allows users to build and manage applications through Microsoft’s data centers. The platform was designed to be compliant with Health Insurance Portability and Accountability Act (HIPPA) regulations.

“Microsoft is helping us support governments in their expansion of cannabis legislation,” Dinenberg told CNN Money, “they’re experienced at providing platforms for government regulation. This is something Microsoft does every day of the week with other businesses in other categories.”

Azure has been growing like a weed since its launch in 2010. For the first quarter of fiscal 2017, Azure revenue jumped 116%.

So Microsoft’s move into the weed space spotlights the way it’s leveraging the cloud to propel growth.

It’s a smart strategy: Market researcher Forrester estimates the cloud market will grow from $55 billion in 2014 to $241 billion by the end of the decade.

Weed is just the latest development in Microsoft’s exciting cloud story.

Now, no one is suggesting that an alliance with the cannabis markets constitutes anything approaching a “game changer” for Microsoft. The company has a market cap of $569 billion and annual revenue north of $85 billion – don’t look for the stock price to triple.

As marijuana moves into more and more American homes and doctor’s offices, Microsoft’s cannabis compliance investment will increasingly move the needle.

What’s more, Microsoft gets you low-risk entry into the legal cannabis sector and a respectable 2.14% dividend yield. This is one to buy now and build out on dips.

— Michael A. Robinson

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Source: Money Morning