Pot Stocks: What Investors Need to Know in 2018 and Beyond
Cannabis is not king yet, but Green Gold offers investors potential.
Marijuana has legitimately (and in a growing number of cases, legally) gone mainstream in the U.S. during the last decade.
Washington and Colorado were the first states to legalize the recreational use of cannabis, and Nevada, Oregon, California, Massachusetts, Maine, Vermont , and Alaska have followed suit. Dozens more states allow for legalized marijuana for medical reasons.
With legalization comes robust cannabis industry growth
The global medical marijuana market is expected to reach a value of USD 55.8 billion by 2025, according to a report by Grand View Research, Inc. Meanwhile, legal marijuana sales crested $9.7 billion in North America in 2017, according to data from Arcview Market Research, a 33 percent hike from the year before.
Those numbers spell opportunity for profit-minded investors looking for a foothold in the potentially lucrative cannabis sector.
Consequently, opportunities to invest in cannabis stocks and funds are burgeoning—if those investors have a good grip on an often slippery marijuana trading market.
That’s why in 2018 and beyond, sober cannabis investors would do well to factor in a few key elements and impactors that could get in the way of sector growth this year. These issues are at the top of the list:
Small Ball a Problem: By and large, the cannabis trading market is comprised of smaller industry firms, with low market share. Many of these companies lack the size to trade on the prominent stock exchanges, and are mostly limited to trading activity on the over-the-counter market, where regulatory enforcement can be more lax than with larger trading markets, and where shady marijuana outfits have engaged in so-called “pump and dump” trading practices and have issued bogus claims about their companies in an effort to boost their company’s share prices.
Cannabis investors are advised to tread carefully on these smaller trading markets.
Banking Issues: For all the buzz over so-called “green gold”, banks and lenders have kept the cannabis industry at arm’s length, which created a scenario where marijuana industry companies (especially younger ones) wind up looking for financing from non-traditional sources, like peer-to-peer lenders. The banks that do engage with cannabis companies are charging higher fees than with traditional business clients, due to the precarious federal statutes on marijuana industry commerce—particularly interstate retail limits.
That creates a high barrier to entry for younger cannabis companies, and financing headaches for even established marijuana-related companies.
Vetting Problems: As marijuana has only recently gained legal acceptance the market for cannabis companies is rife with pot businesses that have not undergone proper due diligence. A particular thorny problem for the cannabis industry is that the professional accounts, lawyers, and forensic business experts that traditionally handle due diligence for cannabis companies (and the investors who may want to engage in cannabis trading) are inexperienced in the marijuana sector, thus making it even more difficult to properly vet cannabis companies that wish to go public.
Real Estate Woes: With marijuana still illegal on a federal level, the cannabis industry has an optics problem in local communities where pot usage still faces resistance. That’s a problem for marijuana growers and distributors face extremely tight, and highly regulated real estate markets on the local level. Part of the issue is property owners reluctant to lease their property to cannabis companies and part of the problem is strict zoning restrictions for cannabis companies. Mix in security equipment, agricultural equipment fire-prevention equipment (including sprinkler systems), geographical restrictions to schools and libraries, and other real estate-related start-up costs, and cannabis companies have their hands full on the property front.
Major Marijuana Industry Players
While good, solid investment research can help reveal the best cannabis stocks and funds to consider for one’s portfolio, the industry does already offer some intriguing standard bearers. They include:
AbbVie Inc (ABBV): This life sciences company is on the fast track with an already FDA approved cannabis drug called Marinol, which provides side effect relief to chemotherapy patients. Marinol is also increasingly being prescribed by physicians for AIDs patients, to relieve loss of appetite issues.
Insys Therapeutics (INSY): This biotechnology company offers another cannabis-based drug for cancer patients called Syndros, an FDA-approved cannabinoid that fights another common side effect to chemotherapy—anorexia and loss of appetite.
Corbus Pharmaceuticals Inc. (CRBP): This biopharmaceutical firm manufacturers and sells cannabis-based therapeutics to fight inflammatory-fibrotic diseases. The firm’s benchmark product is an oral endocannabinoid-memetic drug called Resunab, which targets systemic sclerosis, a serious autoimmune rheumatic disease.
Canada-Based Cannabis Companies: Look to the Great White North for major impactors in the marijuana sector. New legislation is winding its way through the Canadian government to legalize recreational across the country use of marijuana by July, 2018. Data shows the new law would boost the Canadian cannabis market by $5 billion once the legislation becomes law. The Canada-based cannabis companies with the largest market share, and thus the major beneficiaries of the new law, include Canopy Growth Corp.
(TWMJF), Aurora Cannabis (ACBFF), Aphria (APHQF) and MedReleaf (MEDFF)
The Bottom Line
The North American marijuana market is still in its training wheels stage, with as many misses as hits for profit-minded investors. Increasingly, though, the industry shows signs of shedding those wheels and becoming a major player on the world stage.
As the cannabis sector picks up speed, it’s up to investors to study new developments and opportunities in marijuana manufacturing and sales, especially in the burgeoning marijuana-based biotechnology sector.
So, keep an eye on cannabis, and it’s potential for a game-changing “green gold rush”—one beautiful bud at a time.