Within the next five years, the cannabis industry will be dominated by a few big firms. Deciding where to invest poses a challenge for new investors.
Is cannabis a safe investment?
Let’s take a look at some of the investment risk factors and stock highlights.
Cannabis Investment Risks
After a massive rise in cannabis sales in 2017 and promising estimates for 2018, pot stocks have skyrocketed. There are concerns with industry analysists that the cannabis stock bubble will pop and that prices and margins will fall.
Additionally, there are legal issues to consider when investing in cannabis. Despite the strides of progress, cannabis still remains illegal at the U.S. federal level. Firms with all or some of their assets in the U.S. must always be prepared for the possibility of their assets being seized by U.S. federal authorities.
Changes in Public Perception
With the recent changes in both the legal and societal status of cannabis use, investing in cannabis could very well be a safe bet. Now legalized, medicinally and/or recreationally, in 36 U.S. states and Canada, cannabis is on its way to becoming a household staple.
In fact, The World Health Organization recently came out with a recent report on Cannabidiol (CBD), a non-psychoactive cannabinoid found in the industrial hemp and cannabis plants.
“WHO Expert Committee on Drug Dependence (ECDD) concluded that, in its pure state, cannabidiol does not appear to have abuse potential or cause harm. As such, as CBD is not currently a scheduled substance in its own right (only as a component of cannabis extracts), current information does not justify a change in this scheduling position and does not justify scheduling of the substance.”
Top Pot Stocks
Canopy Growth Corp leads the industry as the world’s largest publicly traded cannabis firm. Additionally, Canopy is backed by Constellation Brands Inc., a top U.S. liquor firm.
Another key player, Aurora Cannabis Inc., leads in state-of-the-art cultivation facilities, allowing them to maintain low growing costs. Aurora is also permitted to sell cannabis to German pharmacies, making up for the legal issues slowing things down in the U.S.
One of the few big firms to gain profitability is Aphria, Inc.; however, there are concerns with Aphria’s operations in the U.S. and the risk of asset confiscation as mentioned previously.
MedReleaf is also a profitable firm that sells medicinal cannabis, extracts, and oils that performs well.
Highly Regarded Pot Stocks
Biotech Firms like Cara Therapeutics Inc. and GW Pharmaceuticals PLC. are currently developing a variety of cannabinoid drugs. Though there is a possibility that these drugs could become big sellers in the treatment of neurological and other disorders, the risk lies in the fact that the products are still in development and have yet to pass clinical trials.
Low-risk marijuana-related stocks
For those looking to lower their risk by investing in pot-related stocks, there are a few good options available. Scotts Miracle-Gro Co., a leader in the lawn-care and garden business, sells specialized soil and plant nutrients to growers in the cannabis industry.
Another option is to invest in Constellation Brands, a key player in the U.S. liquor industry, as they have a large stake in Canopy Growth, one of the top pot firms in the industry.
Shoppers Drug Mart, a large chain retailer across Canada, aims to become a major cannabis retailer. Though the pot-retailer applications are still in process, they are already working with Aphia and MedReleaf make this future a reality.
The cannabis industry leaves many investors feeling wary of the potential risks, yet thrilled at the possibilities that investing in the industry provides. Ultimately, those interested in taking part will need to do their research and select firms with a consistent track record of success.