Mad Money

Seeking new high, Cramer turns to cannabis

Playing the marijuana market

(Click for video linked to a searchable transcript of this Mad Money segment)

Cramer takes his commitment to find you new opportunities very seriously. And he's unafraid to go deep in the weed.

"I know there's a lot of interest in marijuana," Cramer noted. "This is becoming a rapidly growing area of business."

That is, as more and more states approve , a growing number of firms are attempting to leverage the new opportunities.

"Here's the problem, though; the vast majority of these names are penny stocks that are just insanely risky. However, I do think there's a more conventional play on the theme.

And that's GW Pharmaceuticals.

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In fact, Cramer's so enthusiastic, he made this stock his pick for 'Spec Friday,' a regular "Mad Money" feature in which Cramer presents a more speculative opportunity that presents higher risk but also higher reward.

In the case of GW Pharma, Cramer says buying the stock is a bullish bet on the company's ability to extract various compounds found in marijuana, and then develop uses for them.

"Right now, GW already has one drug, Sativex, approved in 25 countries outside of the United States. This is a mouth spray that takes ingredients from cannabis and uses them to treat multiple sclerosis spasticity," Cramer said.

Currently Sativex is in phase 3 trials here in America not only for MS but also for severe cancer pain.

"Between these two indications, this drug could do around $800 million in peak sales," Cramer said.

Also, GW Pharma is developing a cannabis based drug called Epidiolex to treat epilepsy. "This won't hit the market for a while," Cramer said. "It's only expected to enter phase 2 clinical trials later this year, but so far the results have been very compelling."

In addition, GW Pharma is exploring other ways the compounds found in marijuana could be used to treat disease, with the company's research into autism receiving significant attention. "That could be a gigantic opportunity, if it pans out," Cramer said, "not only to make money but to help a huge number of people."

And unlike other treatments, which involve smoking marijuana cigarettes, treatments developed by GW Pharma are largely taken orally.

"Why is a pill better than smoking the actual plant? Very simple. When you take a drug, any drug, you really want to take the same, consistent dose every single day. If your dosage varies all over the place, then your medicine is not going to work like it should. The problem with marijuana cigarettes is that one batch could be very different from another batch. Oral medications control for that."

All told, Jim Cramer thinks GW Pharma may be facing significant opportunity. There is one catch, however.

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"The stock, already, has had a titanic run. It came public almost exactly one year ago at just $8.90, and since then the darned thing has been on fire, rallying up to $72 and change where it is right now," Cramer said.

Cramer doesn't like to chase. However, he does think the stock presents opportunity.

"Morgan Stanley recently rolled out coverage with a $103 price target, which would represent a 42% gain from these levels, and longer-term, that could be conservative," Cramer said. If these drugs can get FDA approval, then I think GW is going much higher."

Call Cramer: 1-800-743-CNBC

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