Cannabis stocks have been all over the proverbial map since their introduction in the market in 2018. At first, the buzz was unavoidable and hopes were high for great things to happen, more specifically in the soon-to-be legal Canadian cannabis market and with state by state buzz in the United States. Then in 2019, due to small and unpredictable global cannabis market/stocks, as well as Canada’s market being sluggish, weighed heavy by legal fees, distribution hiccups, and capacity shortages, profits were not being generated as anticipated. The United States markets remain scattered and slow to throw hats into the ring. With precedent in advisors’ recent memories, this range of investor highs and low are now predicted for the next several years. Generally, cannabis stocks lost 60%+ of their value since mid-2018.
As of late 2019, supply issues in Canada are continuing to affect the marijuana industry, while the high tax rates in the United States for legal cannabis push consumers to the cheaper black market and cultivators to illicit production. A recent low point index price of 111.18 occurred after the November 21, 2019 announcement by California of a cannabis excise tax mark-up ranging 60-80%, effective the first day of the next year. Out of the 10 largest publicly traded cannabis companies, only Massachusetts-based Curaleaf is slated to end 2019 in positive territory, gaining 6% as of mid-December. An emphasis on profitability is growing among many trades as a measuring factor.
The year 2020, however, has market watchers cautiously optimistic, as improved distribution networks and larger capacity should improve the Canadian cannabis market. In the lower 48, U.S. legislation is expected to make progress, as the House Judiciary Committee approved the Marijuana Opportunity Reinvestment and Expungement (MORE) Act. Also known as H.R. 3884, this bill aims to decriminalize and deschedule cannabis, to provide for reinvestment in certain persons adversely impacted by the War on Drugs, to provide for expungement of certain cannabis offenses, and for other purposes. It is currently in the House, as of 11/21/2019, and is ordered to be amended. These progressions, alongside the record-low valuation levels of cannabis stocks, could cause these stocks to rise dramatically. Within the next decade, experts predict cannabis sales could reach immense heights: $30 billion by 2025 (New Frontier Data), $50 billion (Jefferies Group LLC)/ $100 billion by 2029 (Stifel Financial Corp), and $75 billion by 2030 (Cowen Inc.).
Cannabis Stocks and the Experts
Overall, ups and downs are nothing strange to the stock market industry. Find a listing of publicly-traded cannabis and marijuana-related stocks here; cannabis stocks represent new investment opportunities as public companies provide products and services for medical and recreational use. If taking the plunge into this realm sounds favorable, then heed some advice from internet experts:
- Invest in at least four or five marijuana stocks rather than trying to pick one or two top stocks. This diversification will mitigate risk.
- Look for companies with offerings of unique goods and services. With booming demand and new market entries each day, sales are smooth right now. Prepare for the market to balance out by choosing businesses with leading brands and differentiated products. Investors, partners, and customers will gravitate toward high-quality and unique products.
- Consider a pair trade and go with both CBD-related companies and THC-related companies. With CBD being legal across more states, affiliated companies are more likely to have obvious growth, while THC affiliated companies hold tortoise status and are slowly but steadily being legalized for medical and recreational use.
- Short selling cannabis stock is an option but watch it carefully.
- Don’t assume information online is accurate. As many cannabis stocks are still micro-cap stocks which trade on the over-the-counter market, there are much more relaxed standards for financial reporting than the New York Stock Exchange or Nasdaq composite. Promotional companies can skew wording to make companies seem more profitable.
- Prepare for headline risk, i.e. as studies about cannabis and related drugs are released, stocks may fluctuate due to public reactions and concerns.
Learn More about Marijuana Stocks At CannaCon
As with all financial decisions and stock market trading, research and caution are key. Consult a professional if considering entering this arena for the first time, or gather with like-minded persons at CannaCon to engage in conversations and lectures regarding cannabis stocks. These events happen in Tacoma, Detroit, Chicago, and Oklahoma City throughout 2020; they are the best place to inform yourself as an interested party to the mmj industry.