Stock Market Guide: How to Buy Cannabis Stocks

Marijuana has been used for thousands of years as medicine and for recreation. But it has been illegal for over a century for both purposes. However, the scenario is rapidly changing. Medical marijuana is now legal in more than 30 countries and recreational cannabis is currently legal in several of those, and growth trends are observed in all markets.

When the Canadian government recently legalized recreational marijuana, it was just natural that companies saw a huge opportunity to participate in the “green rush” of the cannabis market.

Considering the growing number of countries and states that have legalized cannabis, analysts project that the annual global marijuana market could be worth $150 billion or more within the next 10 to 15 years.

Choosing Marijuana Stocks

Cannabis stocks began trading only in 2014, so these are very new unchartered waters. The same basic principles to invest in stocks apply to marijuana stocks:

  • Consider the evolution of the market cap of the company.
  • Research the company’s strategy for growth and expansion.
  • Check how the company intends to stand out in the ever expanding cannabis industry.
  • Identify the company’s top partners.
  • See if the company is already profitable and or how quickly it expects to become profitable.
  • The stock market is very dynamic, so following up the companies’ performance is crucial.

An Emerging Industry

As an emerging industry, cannabis stocks are exciting papers to have at the moment if you are comfortable with the level of risk imposed by the ups and downs of such a new industry. Cannabis stocks have room for incredible growth.

Different Types of Marijuana Companies – Different Types of Stocks

There are three primary kinds of marijuana companies:

  • Marijuana growers and retailers – companies that cultivate the plant, usually in indoor facilities and greenhouses.
  • Cannabis-focused biotech and pharmaceutical – companies that develop prescription drugs based on ingredients found in cannabis.
  • Providers of related products and services – companies that provide and supply key products and services to the marijuana industry, like consulting, distribution, hydroponics, lightning systems and packaging.

As the industry started to expand, big growers were the first to attract attention. Currently, there is a tendency to pay attention to other aspects of the business.

According to Greg McLeish, Analyst of Mackie Research Capital Corp., investors should look for companies that wanted to move beyond the cultivation. Companies dedicated to pure cultivation are disappearing and only those which have value-added services will survive.

As value-added we understand CBD oils, edibles, cannabis-infused beverages, concentrates, creams and lotions.

There is a growing number of interesting and potentially profitable options out there and many of them include edibles.

Safe Edibles will be Part of the Future

When Canada legalized recreational marijuana, it has opened interesting and potentially extremely profitable options for investors.

The market for cannabis edibles could be roughly $ 2.7 billion a year, according to a new report. The next phase of cannabis legalization, which will include edibles and other alternative products, could generate even higher profits.

A report by Deloitte estimates that more than $1.6 billion will be spent annually on edibles and $529 million on cannabis-infused drinks, while topicals, concentrates, tinctures and capsules would combine for more than $400 million in sales.

Marijuana edibles are expected to rise 310% from 2017 to 2022. In fact, many cannabis companies are migrating into the edible space to serve this consumer market.

In 2017 alone, US and Canadian consumers spent $ 1 billion USD on edibles and by 2022 it’s projected that both countries will spend up to $ 4.1billion on marijuana edibles.

Diversification is Still the Answer

Investing in ETF’s is an option if you don’t have access to the resources needed  to make an informed assessment of a company. They make it easy to invest in cannabis stocks that have already been pre-selected by teams of professionals, who have analysed and selected them to include in these ETF’s.

Then decide the amount to invest. Never invest more than you can afford to lose, is the golden rule. Stocks are volatile and consequences are unpredictable.

Are you ready to start investing in this growing market? We’ve created a series of articles covering all the basics to start, check out two of our Stock Market Guide for the next steps:

How to Invest in Stocks for Beginners

Building a Profitable Stock Portfolio