Believe it or not, the marijuana industry took the financial markets by storm last year. In fact, experts predicted that this will continue over the succeeding years. Marijuana stocks were so high by October 2018 with most of them doubling since July!
Understanding the Marijuana Industry
The important question here would be: what sparked this investment craze on cannabis? To further understand the cannabis industry, we have to know what the cannabis industry’s underlying business is. It’s actually more complex than what it seems.
Let’s start by looking at some of the key geographic considerations. Canada’s marijuana market actually received the most attention considering that they have a mature cannabis market and an anticipated legalization of recreational marijuana in 2018. With this in mind, some of the world’s biggest marijuana producers are in Canada.
Another thing to note is that there are three kinds of stocks in the marijuana industry:
- Cannabis-focused drug makers
- Marijuana producers
- Ancillary products and services providers
What to Look For in Marijuana Stocks
If you are planning to invest in marijuana stocks, there are two things you should look out for – growth opportunities and a chance to capitalize on said opportunities. When we say Growth Opportunities, we are pertaining to geographic locations where marijuana stocks can operate legally. A good example would be some Canadian marijuana stocks that can operate businesses in the United States of America. Furthermore, they will be able to maintain their listings on several major stock exchanges.
In determining if a particular marijuana stock can be capitalized, you have to watch out for any possible competition or hindering factors. For example, a marijuana producer would focus on how much companies can grow. This can be heavily reliant on the amount of cannabis, which is normally measured in kilograms, that is grown yearly.
The Issues Regarding Over-the-Counter Exchanges
Even though there are a number of states in the U.S. that have legalized marijuana for recreational and medical use, there are still those that recognize it as illegal under the federal law. Marijuana is actually classified by the Drug Enforcement Administration (DEA) as a Schedule I drug. As a result, this has made it hard for companies to strive on getting listed on the Nasdaq Stock Market and The New York Stock Exchange.
Eliminating Any Bad Marijuana Stocks
Another question that haunts would-be marijuana investors is choosing good cannabis stocks and avoiding the bad ones. To answer this question, you have to be able to do proper research. Nonetheless, beginners would find it overwhelming to simply dive into all of these. A good way to solve this issue would be to invest in an exchange-traded fund (ETFs).
ETFs make it easy for anyone to invest in cannabis stocks because these are stocks that have already been pre-selected by analysts who have conducted proper research on each of these companies.
Keep in mind that if you are planning to invest in marijuana stocks, you should not only focus your attention on growers or retailers. Always look at the bigger picture. Who else is involved in marijuana production? There are actually a great number of companies providing ancillary services to the marijuana industry. There are also derivative plays that are involved in making cannabis-based drugs. These are the things you should consider when investing in marijuana stocks this 2019.
Now that marijuana stocks are on the rise, investors should be wary of certain things when getting involved with these kinds of stocks. In addition, there are still a number of marijuana data companies that remain illegal under federal law. However, the number of states that have legalized marijuana is drastically increasing.