Insights Guide to Investing in Cannabis
California opened the doors to legal recreational cannabis on January 1st, and the state’s economy AND those of us investing in cannabis are grateful for it!
In times of confusing economic growth indicators, cannabis is proving itself a reassuring bet. California is set to earn $1.4 billion in taxes from the sales of recreational cannabis. This is to say nothing of legal fees and taxes on applications for businesses.
Many will try to earn money on the cannabis “green rush” by starting new businesses. But there’s one way for people to earn money on the market without needing to trim any bud: Investing!
California is the biggest cannabis market the industry has seen yet.
California has been supplying medical patients with cannabis since 1996. This tightly monitored version of cannabis legalization isn’t nearly as open to the public as recreational cannabis. That’s where the money really is.
If a state has fully legalized medical and recreational cannabis, this opens up the door to all kinds of industries:
- Cannabis dispensaries.
- Grow farms.
- Branding and marketing for canna-brands, with special attention to adhering to federal and state laws.
- Pot tourism, including 420-friendly hotels and accommodations.
- Cannabis clubs (if public consumption is allowed).
- Hemp products, including industrial and scientific applications.
- CBD-only medicinal salves and lotions.
- Specialty lighting for cannabis cultivation.
- Cannabis products (including powders and drinks) targeted toward athletic recovery.
- Conferences for cannabis investors.
- Legal groups for those prosecuted under past laws.
- Baking of infused brownies and other edible goods.
- Laboratory testing for potency.
- Custom agricultural products for cannabis.
- Specialty paper and plastic for cannabis packaging.
- Advocacy groups for legalization in other areas.
- Cannabis delivery services for the infirm (or people just too busy eating pizza!)
Massachusetts, Vermont, and Maine are on the way to full recreational cannabis legalization.
Citizens in Oregon, Nevada, Washington, Colorado, and Alaska have already been enjoying legal cannabis (and all the tax revenue it brings).
But California’s legalization opens up the biggest market in the United States to date.
Purchases of cannabis are predicted to run neck-and-neck with beer, and will likely overtake it by 2021. (wow)
Growers (legal and illegal) have existed in California for decades. But thankfully, it looks like many of them want to go legit. Recent crackdowns in northern California against licensed cannabis farmers have been met with ardent disapproval. The county in question had earned over $7 million in taxes from the farmers.
Cannabis stocks soared at the beginning of 2018 in anticipation of more legalization.
Publicly traded companies in the cannabis industry have opened up the market for us to invest in legal cannabis.
In 2017, the North American Marijuana Index cited a gain of 90% in 2017. This is an amalgamation of stocks explicitly tied to cannabis.
In short: The money’s starting to roll in and probably will continue! Expect to see a lot more cannabis-explicit stocks opening up as more states and countries undergo medical and recreational legalization.
But these stocks are far from the whole story. For people who are looking to invest in legal cannabis in the current market, you sometimes have to dig deep to find the heavy hitters.
The cannabis sectors.
The cannabis investment landscape is made up of 11 sectors:
- Consumption Devices
- Cultivation & Retail
- Hemp Products
- Investing & Finance
- Marijuana Products
- Other Ancillary
- Real Estate
- Secondary Services
- Tech & Media
The Canadian LP’s trade in the Cultivation & Retail sector but we have 21 total holdings as of this writing that cover almost all 11 sectors.
Most of these stocks are microcap stocks aka penny stocks because their total market capitalization is between $50M and $300M.
One other thing to note is that even though we are heavily invested in Canadian stocks, we trade the US equivalent ticker symbol listed on the OTCMarkets.
For example, one of our best-performing pot stocks of 2017, Canopy Growth Corp, trades on the Toronto Stock Exchange under the ticker symbol WEED and has a US-equivalent ticker symbol TWMJF that trades on the OTCPink aka the “pink sheets.”
Not ready to take a leap on a “cannabis” company because you don’t like microcap stocks?
Check out Scott’s Miracle Gro (NYSE: SMG). This classic American brand is working on developing special pesticides for cannabis.
Considering cannabis responds differently to most pesticides than most crops and is designed for human consumption, that would translate to millions (if not billions) of dollars if they were to become the industry leader.
Companies based in Canada tend to be major frontrunners for cannabis stocks. Especially the licensed producers or growers of cannabis who are fully licensed by the government.
Take a look at Canopy Growth Corp. (OTC:TWMJF)
We bought it for the CannaVestor Lab “pot-folio” on May 16, 2017, for $5.99 a share and by December 31, 2017, it was trading for $23.66 a share – an unrealized gain of 295%!
So, why Canada? Because it’s been legal for medical patients to obtain cannabis for treatment since 2001. They’ve had more time to develop cannabis technology (and for those stocks to go public) with the blessing of the government!
Recreational purchases will become legal across the entire nation of Canada as early as July 2018. This would make them the second country on the planet to legalize cannabis on a countrywide level (the first being Uruguay). The skyrocketing number of medical marijuana patients within the country are sure to make this a financial boon for the Great White North.
The risks of investing in cannabis.
Companies working with cannabis currently offering stock vary widely. Many companies are still cautious about breaking federal law. They often play it “safe” and stick to industries like agriculture and testing.
Advertising is heavily restricted for cannabis, even in states that allow recreational use by adults. The companies seeking to advertise often dismiss many outlets due to the remote possibility that their ad may reach a child that cannot legally consume cannabis.
Due to recent statements from Attorney General Jeff Sessions, enforcement of federal law will largely be in the hands of individual states. Where is the company you wanted to invest in based? Depending on who’s in power, they might lose their license!
With laws shifting all the time around cannabis, even in the states where it’s now legal, it’s hard to know where to invest. What to do?
CannaVestor Lab monitors opportunities for investment in real time.
Join CannaVestor Lab to get access to our cannabis investing newsletter and real-time trade alerts. We take the guesswork out of investing in cannabis.
We help our customers succeed in their efforts to capitalize on the green rush.
Our pot-folio gained 179% in 2017 and is up to 225% just since January 1st.
The cannabis market is exploding and is likely only to increase. We want to help you find the best cannabis-themed stocks—explicit and hidden alike—so that you can take advantage of this green rush sweeping the world.
Sign up for our FREE CannaVestor Lab Guide to investing in cannabis. We’re here to help you succeed in cannabis investing!