It is safe to say that 2018 is the year that marijuana stocks are expected to really come into their own. Why is this? We could start with the expected legalization of recreational marijuana in Canada later this year. We also cannot forget the legalization of the recreational use of the drug in California. There are also several cannabinoid-focused biotechs having major milestones in their businesses in 2018.
For most American investors, their money actually goes north of the US border, where there is a more developed marijuana industry. Most cannabis investments in the US are termed ‘ancillary’ investments – companies that do not actually deal in marijuana but who offer related products and services that include irrigation systems, packaging, vaporizers, software and even cannabis-based pharmaceutical products.
Tracking almost 40 leading pot stocks, the North American Marijuana Index gained more than 90% in 2017. Most industry watchers expect it to perform even better this year. Can you profit from making an investment in pot? Here are the options available, and what the future holds for cannabis investing.
What You Should Know about Weed Stocks
If you want to invest in cannabis stocks in North America, there are two options available: penny stocks sold at over-the-counter exchanges, or stocks of regular companies that are available on the TSE, NYSE or NASDAQ. Both kinds can be bought at online brokerages.
While penny stocks are cheap, they are also extremely risky. This is because they do not have many people investing in them and are very volatile. The liquidity of this type of stock, due to lots of people buying and selling at the same time, can make for some wild price swings. When renowned cannabis penny stock investor Jason Spatafora (commonly known as the ‘Wolf of Weed Street’) first put his money in marijuana in 2013, he got a first-hand taste of this phenomenon. He bought 10,000 shares at $500 and, in two days, the value of the stock rose by 50%; two days after this, the shares tanked.
Besides the risk of volatility, it is important to keep in mind that penny stocks are not subject to the same stringent reporting standards as traditional stocks. To avoid falling victim to a ‘pump and dump’ scheme, do your research – read expert analysis of the company, search for its ticker symbol on Twitter, investigate the history of the founders and track its revenues.
Alternative Investment Options
It is also possible to invest in cannabis indirectly. There are a number of publicly listed companies which offer products and services to pot growers. These firms are definitely poised to benefit from the expansion of the industry.
What is probably the highest profile marijuana stock in this class is Scotts Miracle-Gro (NYSE:SMG). The company sells hydroponics, lighting systems and fertilizers that are essential for the growth and cultivation of marijuana. Anticipating growth in the cannabis market and to bolster its position in the industry, the company has made a raft of acquisitions in the past few years that have added value to Scotts.
If you are more of the speculative type, you could take this chance to pick Glance Technologies, a small company specializing in mobile payment solutions. In May 2017, the firm licensed its payment technology to Cannapay Financial, a company that provides fintech systems to marijuana users and suppliers. Glance also purchased a significant stake in Cannapay.
Another stock you could consider, if you want to invest in cannabis without buying into a pure-play cannabis stock, is Constellation brands. Because it owns 9.9% of Canopy Growth and plans to start producing a marijuana-infused brand of beer, it stands to make major gains from the legalization of recreational weed in Canada.
The Last Word
The future of cannabis investing is undoubtedly bright, with marijuana providing an exciting new opportunity for investors.
Above everything else, what you need to know is that the people who stand to gain the most from cannabis investments in the future are those who treat it as they would any other investment. What this means it that the principles applied to other stocks apply to marijuana investments as well. Ensure that you vet potential investments thoroughly and keep abreast of the latest developments legislation-wise.
A good way to find out if this type of investment is a good choice for you is through ‘paper trading.’ This is writing down what stock you are interested in, when you would buy and sell it, and see how you would do before you put down real money.
With that being said, it is clear that there are plenty of people who will make a lot of money from investing in marijuana stocks moving forward. Could 2018 be the biggest year for cannabis stocks? We will soon find out.