Investing in Public Companies that Sell CBD

Interest in cannabidiol (CBD) has taken off over the past five years since CNN highlighted its promise in the documentary Weed. GW Pharma (NASDAQ: GWPH) has submitted a New Drug Application for its CBD-based Epidiolex (which has received Orphan Drug Status in the European Union) with the FDA.

If it receives final approval later this year (which appears probable) it would be the first pharmaceutical ever legally available that was derived from botanical cannabis, sparking even more interest in CBD.  The Hemp Business Journal believes that the market for CBD derived from industrial hemp will grow from approximately $50 million in 2014 to upwards of $736 million in 2020.

With so much interest in CBD, and bigger companies starting to make investments in the sector, what should a cautious investor look for to help make an informed decision in this emerging market?  Here are a few filters to apply when evaluating CBD producers before investing:

  1. Does the company file with the SEC? Transparency is a must for investors.  If there are no filings, then the company isn’t truly transparent.
  2. Next, does the company generate significant revenue?
  3. In addition, the company should clearly explain the source of its CBD and the methods of production? CBD can be produced in a variety of ways, including both naturally and synthetically. Synthetic CBD may prove to be more economical in the long term if it is as efficacious as plant-derived CBD, but it’s too early to make that call.
  4. Finally, one should know if there are any sort of independent evaluations or reviews of the company’s products?

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