Marijuana seems to be at the top of every news headline this year. And this industry is currently getting tons of hype as sales of legal weed are ringing in large profits.
The legalization of Marijuana in Canada as well as throughout various places in the U.S. is making this industry expand at a rapid rate.
Cannabis stocks are receiving a lot of attention right now from investors and you may be wondering if you should invest in cannabis.
Is now the right time? And what can you expect from this market? Here are 9 things you need to know before making this decision.
It's important before making any investment, that you get to know the industry you’re wanting to invest in. The thing about the Marijuana industry is that is it fast-paced and is growing at an extremely quick rate.
Because marijuana is just now having its day in the legal spotlight, the industry has quickly become worth billions of dollars.
In fact, just last year, as a whole, the marijuana industry did $52 billion in sales. And those numbers are just projected to continue to keep growing. This industry is only going to increase in value and currently shows no signs of slowing down.
More Than Just A Hype
Although some investors worry about this industry mimicking what happened in the ’90s with the dotcom boom, the marijuana industry is more than just the current craze.
With all industries, there is always the potential of the supply exceeding the demand, however since the U.S. is the leading producer of top-notch bud this isn’t a problem the industry will be facing anytime in the near future.
As more and more states hop on the legalization bandwagon, more supply will be needed. And in most of the places where it has reached a legal status, there are limitations on the number of producers allowed. Meaning now is the time to invest because these producers are in high demand.
What Should You Invest In
Within the industry, there are growers, biotechs, and providers. So, there are companies that directly grow cannabis, companies that have invested a lot into the cannabis industry, and companies who are gaining a lot of revenue from working with the industry.
Depending on what you are looking to do, you can benefit from investing in a successful company that also is benefiting from the weed market.
For example, Miracle-Gro gardening supply company gets about 47% of their current revenue from the marijuana industry. Or you could choose to invest directly into the industry yourself with companies who sell marijuana, like purchasing stocks for planet 13.
Medical Marijuana Questions
Choosing to invest in the medical marijuana side of the industry has been very popular. But it's important to keep in mind if deciding to invest in this aspect that the evidence of the medical benefits of marijuana is still not concrete.
So there is somewhat of a ceiling present on this aspect vs the recreational use of cannabis.
Not Every Company Is A Winner
Like all industries, not every company is going to be at the top of the list. And unfortunately, if a company tries to bypass certain regulations this can really hurt their earning potential.
Make sure to do your research on the company’s history and consider all options before simply choosing one. For example, CannTrust recently got in trouble for growing unlicensed product which has led to a large amount of inventory and sales being put on hold.
Knowing Where The Money Is
Many investors may assume that dried flower is the most profitable market in the cannabis industry. But actually, CBD as well as derivative products like edibles and topicals, have higher profit margins.
These types of products also aren’t as susceptible to over-supply, making them smart long-term choices.
It's important to know that another unique factor of this industry is that marijuana is still illegal federally here in the U.S. Which means like when it comes to money and banking, this industry faces some tough problems, like gaining access to banking services.
This has led to an increase in business using their stock as currency to fund expansion and projects. And although this works to help raise money, this can be a negative to stockholders and dilutes equity.
Invest For The Long Term
Just like with any industry, you should only invest as much as you’re willing to lose and should be investing for the long term.
It's easy to get caught up in the sensationalized stories on which company is doing best and feel like you want to seesaw between picks. But to come out a true winner you’ll need to be patient, pick a company you believe in, and ride it out for a few years.
Future Of Cannabis
As cannabis legalization continues to expand, so will the market. And many industry CEO’s expect it to hit legalization on the federal level sooner rather than later.
Especially after this year’s recent legalization of hemp and passing of the farm bill. Meaning marijuana shouldn’t be far behind. So if there was ever a time to get into this industry it's now.
Deciding To Invest In Cannabis
Like all good investments, you should thoroughly conduct research on the market before deciding to invest in cannabis. But of all markets to invest in this one is hot right now and shows no signs of slowing down any time soon.
And luckily for you as an investor, you have a lot of options on ways to get involved. For more lifestyle tips, check out our website!