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How to Invest in Cannabis Stocks: 5 Things to Know

Investors.com

Global marijuana stocks are expected to reach $63.5 billion by 2024, meaning that if you aren't already considering investing in cannabis, now might be an optimal time—particularly because people have never been more in need of the stress-relief that this product can provide.

Before investing, if you're a total beginner, you'll need to start building your investment portfolio. Apps like Robinhood can help you buy, sell, and monitor stocks in minutes, while sites like Vanguard provide more comprehensive options. Then you'll want to set aside an investment budget, which will look different for everyone. In general, you'll want to invest around 10 percent or less of your portfolio into individual stocks.

Here are five steps you need to take in order to invest successfully in the cannabis industry.

Understand the different types of marijuana stocks you can invest in

There are two main types of marijuana stocks you can invest in: medical and recreational. In the United States, medical marijuana is legal in 33 states and can be prescribed by doctors. CBD is one of the more popular types of medical marijuana and has been proven to be an effective way of combating epilepsy, as well as several other rare diseases.

The other, riskier option is to go ahead and invest in recreational marijuana. 11 U.S. states have legalized recreational marijuana, but it's been legal in Canada since 2018.

Decide what type of product you want to invest in

If you're going to invest in marijuana, you have three main options. You might invest in a cannabis grower and retailer, such as Canopy Growth; you might invest in a cannabis biotech company like GW Pharmaceuticals, which focuses on developing cannabinoid drugs; or you might choose to invest in a company that creates products for cannabis growers.

Do your research on your company of choice

Now that you know a bit more about how to go about investing, it's time to do your research. Companies that can grow cannabis for a lower cost will be more competitive, and companies with international connections can be more reliable. It's also important to examine whether the company you're investing in is growing sustainably. Scroll through reports from the past few years to see which companies are strongest and most promising.

Money Done Right suggests that you break your research down into two parts:

  1. Fundamental analysis (which focuses on key information like quarterly profits and income)
  2. Technical analysis (which focuses on price performance and stock price patterns; this takes more effort and might require some outside help)

Regardless, you'll probably want to invest in a variety of cannabis companies. Apps like 420 Investor, Stash, and MarketWatch can help you keep track.

4. Know the risks

Cannabis is definitely a volatile industry. It remains federally illegal in the U.S., and though the industry is expanding, initial stocks have performed shakily. You may want to consider investing in medical marijuana products first before leaping into the recreational sphere.

5. Try out these companies

Despite the risks, some cannabis companies have performed better than others. Some of the best-reviewed marijuana stocks in April 2020 were:

Innovative Industrial Properties

This is a real estate investment trust that focuses on the medical cannabis industry. "A high-pedigree management team and strong business fundamentals helped IIPR raise $250 million in January despite the tight market," said Michael Underhill of Capital Investments in Wisconsin. "The stock's more than 25% year-to-date increase compares favorably to the -15% return of the North America Marijuana Index."

Curaleaf Holdings

This company operates in 12 states in the U.S., and it's America's only cannabis producer that works in the medical, recreational, cultivation, processing, and dispensary sectors. It has a "reported third quarter pro forma revenue of $129 million and adjusted EBITDA of $9 million."

Cronos Group

This Canadian-based investment group is dominating the international medical marijuana market. With a cash balance of CA$1.47 billion at the end of the third quarter, Cronos is growing fast.

Canopy Group

Canopy reported a $2.07 billion in cash equivalents in January. Plus, they now have a license to grow hemp in New York and have launched a massive cultivation facility. They also launched First & Free, an online company that sells hemp and CBD products, and they've partnered with Martha Stewart to sell their products.

Tilray

Tilray is another great option in the CBD sphere. The company acquired Manitoba Harvest, a stock worth $419 million Canadian dollars, in February 2019, allowing the company to spread its hemp distribution capabilities around the world.

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Are Marijuana Stocks a Good Investment?

Back in 1997, you could buy a share of Amazon stock for around one dollar. Imagine if you bought one thousand of those shares and still owned them today (a share is currently around $2,100, almost a 120,000% increase)! The popularity of marijuana stock comes from the potentials of the industry–everyone's hoping to find a payoff much like early Amazon investors. With US marijuana sales expected to reach 23.4 billion by the year 2022, the market could possibly see exceptional trajectory growth in the stock market.

With recent changes to the legalization of marijuana use in the United States, both medically and recreationally, more people are showing an interest in marijuana stocks. And it's no wonder, considering global spending on legal cannabis worldwide is projected to hit 57 billion in a decade. The legal market is growing like a weed (pun intended) and many people are wondering if investing in marijuana right now could pay off in the future.

Who

understanding marijuanaGiphy


Marijuana derives from the cannabis plant, as does hemp. The plant produces cannabinoid chemicals like tetrahydrocannabinol (THC) and cannabidiol (CBD). There are plenty of different companies currently in the pot industry. Before making any decisions on investing in this industry, you should do your research first. When looking into companies dabbling in marijuana, it's important to know what they deal with. Some marijuana stock companies are in the growth and retail industry, such as Canopy Growth Corporation. Others are in the biotech and pharma industry, such as GW Pharmaceuticals, while others are focused on CBD products like Charlotte's Web. Many well-known companies are also looking to become players in the marijuana industry. Anheuser-Busch announced a $50 billion partnership in 2018 with Tilray to research the production of canned beverages that will contain both CBD and THC.

How

When buying stock in marijuana, you have options. You can buy publicly traded stock yourself through over-the-counter trades (OTC), from a stock exchange available through a licensed broker, or through an exchange-traded fund (ETF) which is a group of funds grouped together into one account. There are pros and cons to each of these buying options.

ETFs

Choosing an ETF can reduce your risk, since your portfolio is diversified over many different stocks; but on the flip side, you're not as likely to reap any significant benefits if one of the stocks happens to soar. The two most popular weed-based ETFs are the

ETFMJ Alternative Harvest ETF and the AdvisorShares Pure Cannabis ETF.

OTCs

OTCs, sometimes called penny stocks, are the riskiest buying options simply due to the lack of public information on such new companies, combined with the fact that most of the companies in this stock line are new businesses. The appeal of these types of stocks, however, is their low cost to purchase. For example, cbdMD, a producer of CBD oils, had a stock price at $1.11 per share as of February 23rd. Even though these low stock prices are enticing, it probably would not be wise to put all of your eggs in one basket with any OTC stocks.

The Risks

Just like any budding industry, the potential gain is great, but the risk could be even greater, and your investments might have the risk of going up in smoke.

Legal/Political Risks


politics and marijuanaGiphy


Although recreational marijuana is now legal in 11 states and medical marijuana in 33 states, the drug is still illegal on federal terms under the Controlled Substance Act. With marijuana's classification as a Schedule 1 drug under this act, the federal government declares it to be completely illegal, even for medical use– which technically means that investors who put their money in marijuana companies are conspiring to violate that act. If you're an employee of the federal government, it might be best to steer clear of any marijuana stocks–at least until it's legalized on the federal level. For everyday investors, however, the chance of facing criminal charges is pretty low.

Price to Sales Risks

The price to sales ratio is commonly used amongst investors when evaluating stocks. A company's P/S ratio is determined by dividing a company's market capitalization by its revenue (usually over a twelve-month period). It's important to look into the PS ratio for any company you plan on buying stock in, as this figure gives you a better understanding of how much investors are willing to pay per dollar of sales. The key takeaway: the lower the ratio, the more desirable the stock is to purchase.


projected price to sales ratio marijuana stocksNASDAQ


A look at this P/S ratio chart shows the significantly higher projected P/S ratio in the marijuana stocks compared to other industries. Currently, top-trending marijuana stocks from companies like Cronos Group, Inc., Tilray Inc., and Canopy Growth, Inc. are showing high results for P/S ratio. The good news: P/S ratio is not the be-all-end-all of determining a stock's worth.

Black Market Risks


illegal marijuana salesGiphy

As much as statistics show growth trends in the legalized sector of marijuana-based sales, black market pot sales are still playing a role in hindering the industry's sales. Even with the complete legalization of marijuana in Canada, for example, statistics still show that nearly half of all cannabis users report buying marijuana from illegal sources.Likewise, according to NBC News, in spite of California legalizing recreational marijuana over two years ago, black market sales still outnumber the legal ones.

Dilution Risks

Stock dilution occurs when a company issues new stocks, therefore decreasing ownership percentages of current stockholders, and in turn stock prices. Statistics show that many marijuana-related industries have dilution concerns, which can be seen through market cap statistics showing the share price and the number of existing shares. For example, Canopy Growth's five year market cap analysis chart shows a significant increase.

The Bottom Line

It seems that many of the repercussive risks in the legal marijuana industry will change over time, as more and more countries legalize and decriminalize marijuana. With the growing support of its legalization over time, I believe the legal market is here to stay.

growing support for legalizing marijuanaPew Research Center


It's impossible to invest in any stock without taking risks. The best advice for potential pot investors: Don't devote more than you are willing to risk, do your research before buying any particular stocks yourself, and always remember, diversification is key in any good investment strategy!

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How CBD Improves Your Work Performance

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You've likely heard about CBD. With more states moving to legalize marijuana, we're also becoming more aware of CBD and its benefits.But what is CBD, and can it take your work performance to new heights?

Oils and tinctures are often recommendedCDN

As Natural Stacks explains, "CBD (cannabidiol) is a bioactive component of the Cannabis plant (marijuana) that is becoming well-known for its potential brain health benefits, none of which involve getting high or compromising your short term memory." So, no, you won't be "stoned" at company meetings or on conference calls.

Cannabidiolcan be taken into the body in multiple different ways, including by inhalation of cannabis smoke or vapor, as an aerosol spray into the cheek, and by mouth. It may be supplied as an oil containing only CBD as the active ingredient (no added THC or terpenes), a full-plant CBD-dominant hemp extract oil, capsules, dried cannabis, or as a prescription liquid solution."

Vaping is popularAmazonAWS

When it comes to getting the most out of your CBD, the experts at CanaGel hemp oil gel melts (the first of its kind) recommend full spectrum CBD rather than CBD isolate. "The CBD isolate is just pure CBD and nothing else. CBD on its own still may have medical value as it is the most medicinal part of the plant, but according to research done by Israeli Organic Chemist, Raphael Mechoulam it was found that all the naturally occurring cannabinoids found in cannabis work better when they are together (rather) than isolated. This is what's known as the 'entourage effect,' where all the cannabinoids work together and become more effective. So, full spectrum hemp CBD is more effective because of all the 100+ cannabinoids like CBD, CBC, CBG, CBDA, <.3% THC than just CBD alone. Unlike CBD isolate, full spectrum CBD is filled with nutrients and contains terpenes, flavonoids, essential vitamins, minerals, essential fatty acids (Omega 3 & Omega 6), protein, chlorophyll, amino acids and fiber."

Melts in your mouthpbs.twimg.com

Customers who use CanaGel have also seen improvement in their mental health, which can lead to an increase in performance and productivity at work. A reduction in anxiety, insomnia (PopSugar Fitness reports CBD may produce alertness in small doses during the day), depression, and other mental health issues have been reported with use of 5-20 mg. daily. Natural Stacks adds to the benefits a relief in stress levels thanks to "CBD's efficacy as an anxiolytic compound." Additionally, "It's thought that CBD influences neuron activity in the hippocampus (the region of the brain involved in memory consolidation and formation) by increasing calcium ion concentrations in the mitochondria."

CBD gummies sound yummyRedStarCBD

Need more proof CBD can up your performance? As per Medical Jane, "Cannabinoids help your brain grow and slow brain aging. Through a process called neurogenesis, new brain cells are constantly being created. Another study published in The International Journal of Neuropharmacology also points to cannabidiol (CBD) as a key contributor of neurogenesis in the brain. Specifically, this birth of new neurons occurred in the Hippocampus, an area typically associated with conscious memory and navigation by making these developing cells stronger."

You can take your CBD before work, but what if you choose to take a dose at the office? A CanaGel representative noted how this can be tricky, since "many people are still very misinformed (about CBD)." Vaping (consider Select CBD) or using tinctures, creams, or oils can be obvious and distracting - not to say they aren't the CBD "vessel" of choice for many - that's why CanaGel recommends their product which is discreet, not to mention highly effective. A gel melt is placed inside the cheek for up to 10 minutes and the CBD is absorbed into the bloodstream. "Independent lab results show that within 7 minutes of contact, virtually 100% was absorbed." No muss, no fuss.

Clearly, there are many mental benefits, but what about side effects? As per Healthline, "Though CBD is generally well tolerated and considered safe, it may cause adverse reactions in some people.

Side effects noted in studies include:

  • Anxiety and depression
  • Psychosis
  • Nausea
  • Vomiting
  • Drowsiness
  • Dry mouth
  • Dizziness
  • Diarrhea
  • Changes in appetite"

As with anything you put in your body, it's important to make sure you are doing It safely. Medical News Today reminds us, "After discussing dosage and risks with a doctor it is important to compare different brands. There are a range of different CBD (products) available to purchase online, with different benefits and applications."

Once you're cleared and ready to use CBD to improve your performance on the job, you'll learn if the mental benefits are affecting you. Hey, you may owe your next promotion to CBD!

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