A Definitive Guide on How to Invest in Marijuana Stocks
Over the past few years, legal marijuana has grown rapidly to become a $97 billion industry. Analysts expect this growth to continue and to hit $97 billion by 2021. Legislation has played a big role in this development, with recreational marijuana sale and use now legal in nine states as well as the District of Columbia. Twenty-nine states have also approved cannabis use for medicinal purposes. As a result, the Cannabis Stock Index jumped 88% in 2016 and climbed 91.8% in 2017.
Whether you do it to support the cause of legalization, are looking to make some money or even a bit of both, now may be the time to put your money where your Mary Jane is. Here is a definitive guide on the options available to you if you need to add some green to your portfolio.
Companies Directly Involved In the Growing and Supply of Cannabis Products
One key group of marijuana stocks is made up of marijuana growers and suppliers. This should come as little surprise, since the legal marijuana industry is still in its infancy. Similar to many early-stage sectors, this is an industry highly populated by companies that deal directly with the product.
This sector is particularly vibrant in Canada, a country which was one of the first in the world to legalize medical marijuana throughout its territories in 2001. In addition, the Canadian federal government is in the process of crafting legislation that would result in the legalization of recreational weed on a national scale. The new laws could be passed as soon as July this year.
As a direct result, a number of companies have emerged to handle the supply of recreational marijuana, with a few of them already listed publicly. The largest of these companies, in terms of market cap, is Canopy Growth (TWMJF), a firm that has seen rapid expansion thanks to several strategic acquisitions. A number of these have been of similar companies abroad, taking advantage of its license to export Canadian marijuana.
In its latest quarterly report, Canopy Growth showed revenues of 15.9 million CAD ($12.7 million), a figure that is more than double its income over the same period in 2016. On the flipside, the cost of its strategic acquisitions has kept the firm in the red.
It is well known that cannabinoids – the chemical compounds found in marijuana – exhibit medicinal and therapeutic properties. For this reason, it is hardly surprising that a growing number of companies in the biotechnology industry are developing treatments that utilize these compounds.
Leading this group is GW Pharmaceuticals (GWPH). Headquartered in the UK, the company is – by and large – a development-stage biotechnology firm. Still, it already has one product on the shelves – Sativex – a spray-on medication used for the treatment of spasticity in multiple sclerosis patients. The company has approval in a total of 16 markets for this product, with applications for approval pending in another 12. However, the US is not among any of these groups.
A treatment that the company is currently developing, Epidiolex, also looks promising. In clinical trials, it has proved effective in the treatment of childhood epilepsy. The company’s stock has been relatively volatile so far, making it only suitable for short term speculators at the moment. Still, some long-term investors could make massive profits if Epidiolex manages to fulfill its early promise.
Stocks of Companies in Marijuana-Related Industries
The smallest category of marijuana stocks is so varied so as to deserve the label ‘miscellaneous.’ The foremost pick in this group has got to be Scotts Miracle-Gro (SMG). This company is a veteran in the supply of garden care products.
Besides helping marijuana plants grow better, Scotts Miracle-Gro is a major marijuana stock since it owns Hawthorne Gardening, a wide selection of brands that provide the market with hydroponics. Hydroponics involves growing plants directly in water, which is a classic method of cultivating pot.
Besides Scotts Miracle-Gro, there is also Medical Marijuana, Inc. (MNJA). Medical Marijuana, Inc. is essentially a fund consisting exclusively of marijuana-related investments. The companies in the fund include both publicly traded entities, like Axim Biotechnologies, and private companies, such as marijuana marketing specialists MPS international.
Another interesting cannabis investment comes in the form of Canada’s Cronos Group, which has decided to take the assets-collection route. The company owns three marijuana production and marketing companies outright, with strategic interests in three more.
Less-Known Marijuana Penny Stocks to Consider In 2018
Not all investments in the marijuana sector involve publicly listed entities. There are several interesting over-the-counter marijuana penny stocks that you would do well to have a look at:
- Nutrafuels (NTFU): Nutrafuels is a global leader in the manufacture of cannabidiol (CBD), and has its headquarters in Florida. It specializes in the production and sale of cannabidiol both in the US and internationally, offering stock and custom CBD formulations.
- Aurora Cannabis Inc. (ACBFF): This Vancouver-based company is active in both the cultivation and sale of medical marijuana in Canada. It has a 55,000-foot cannabis growing facility that utilizes water from the Rocky Mountains to offer its customers high-grade medical cannabis. It provides free shipping of the product throughout Canada, and the company’s revenues have grown by more than 90% since the start of 2017.
- American Cannabis Company Inc (AMMJ): American Cannabis was incorporated in 2001 and provides solutions tailored toward marijuana businesses throughout North America. The company’s operations encompass two areas: Advisory and consultancy services as well as sales of equipment to the cannabis industry.
Is Investing In Pot Likely To Be A Hit Or Miss?
The main thing you need to look out for before you invest in any marijuana business is its legal status. While marijuana has been made legal for recreational use in 9 US states, with 29 more allowing its use for medicinal purposes, pot is still categorized as an illegal substance by the federal government. Also, Attorney General Jeff Sessions has outlined measures to introduce stringent new laws on the sale and use of recreational marijuana. As a potential investor, you need to fully understand the legal implications of the trade, since marijuana stock comes with significantly higher risk than shares in other types of companies.