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Cannabis stocks have been on the rise since Canada legalized recreational marijuana in October 2018. Here’s how you can get in on the action.
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The Basics of Cannabis Investing
For those looking to invest in the cannabis industry, there are a few things you should know before diving in. The cannabis industry is still relatively new, and therefore, risky. However, with the right research and approach, investing in cannabis can be lucrative. Here are a few things to keep in mind when considering investing in cannabis.
What is the cannabis industry?
The legal cannabis industry is still in its early stages, but it is rapidly evolving. Currently, there are two main types of businesses operating in the space: growers/suppliers and retailers. Growers and suppliers produce and sell cannabis products to retailers, who then sell those products to consumers.
The industry is currently benefiting from a number of trends, including the growing acceptance of cannabis as a medicinal product, the legalization of recreational cannabis in several states, and the increasing availability of high-quality cannabis products. These trends are creating a booming market for cannabis businesses, and investors are taking notice.
Cannabis stocks have been some of the hottest investments in recent years, and more and more people are looking to get involved in this growing industry. Before you invest in any company, it’s important to do your research and understand the risks involved. Here are a few things to keep in mind when considering a investment in the cannabis industry.
1) The legal landscape is still evolving: Cannabis is still illegal at the federal level in the United States, which creates a lot of uncertainty for businesses operating in this space. State laws are also constantly changing, so it’s important to stay up-to-date on the latest developments.
2) The industry is highly regulated: In addition to federal laws, businesses operating in the cannabis space must comply with a complex web of state and local regulations. This can make it difficult and expensive to operate a successful business in this space.
3) There is still a lot of stigma around cannabis: Despite the growing acceptance of cannabis as a legitimate product, there is still a lot of stigma attached to it. This can make it difficult for businesses to attract customers and grow their business.
4) The market is still relatively small: The global legal cannabis market was estimated at $7.7 billion in 2016, according to Arcview Market Research. While this number is expected to grow quickly in the coming years, it’s still relatively small compared to other industries. This means that there is potential for big growth, but also big risks.
The global cannabis market
The global cannabis market is expected to reach USD $146.4 billion by 2025, according to a new report by Grand View Research, Inc. The market is anticipated to grow at a Compound Annual Growth Rate (CAGR) of 34.6% from 2018 to 2025.
The legal cannabis industry is growing rapidly as more countries legalize the use of marijuana for medicinal and recreational purposes. In 2017, Canada became the second country in the world to legalize recreational cannabis and the first G7 nation to do so. Uruguay legalized cannabis for all adults in 2013, and several U.S. states have also legalized the drug for recreational or medicinal use.
This rapid growth has created opportunities for investors who want to get in on the action. Cannabis stocks can be a volatile investment, but there are several ways to minimize risk and maximize returns. Here are some tips for how to invest in cannabis stocks:
1) Do your research: The cannabis industry is complex and rapidly changing, so it’s important to do your homework before investing. Understand the industry landscape and learn about the major players in the space.
2) Consider your risk tolerance: Cannabis stocks can be volatile, so it’s important to consider your risk tolerance before investing. If you’re comfortable with taking on more risk, you may want to invest in smaller or newer companies that have high growth potential but are more likely to experience ups and downs along the way. If you’re risk-averse, you may want to stick with larger, more established companies that have a proven track record.
3) Consider your investment goals: What are you looking to achieve with your investment? Are you trying to generate income or build long-term wealth? Your investment goals will help guide your decision-making process as you choose which stocks to buy.
4) Use stop-loss orders: A stop-loss order is an order placed with a broker that automatically sells a security when it reaches a certain price point — this can help limit your losses if a stock price decreases unexpectedly.
5) Diversify your portfolio: Don’t put all your eggs in one basket — diversifying your portfolio across different asset classes and industries can help reduce overall risk. Adding some cannabis stocks to a mix of other investments can help balance out volatility and maximize returns over time.
The legal landscape of cannabis
The legal landscape of cannabis is constantly evolving. More and more countries are decriminalising or legalising the use of cannabis, either for medicinal or recreational purposes. This changing legal landscape presents both opportunities and risks for investors.
There are a number of considerations that potential investors need to be aware of before investing in the cannabis sector, including:
-The legal status of cannabis in the country/jurisdiction in which you are looking to invest
-The regulatory environment surrounding the cultivation, distribution and sale of cannabis
-The taxation treatment of cannabis businesses
-The potential impact of international treaties on the legality of investing in cannabis businesses.
Given the complex and ever-changing legal landscape, it is important to seek professional advice before making any investment decisions in this sector.
The Different Types of Cannabis Companies
growers
Cannabis growers are companies that cultivate and harvest marijuana plants. In the United States, these companies are often referred to as “cultivators” or “farms.” They typically sell their product to cannabis retailers, but some also operate their own dispensaries. Some growers are publicly traded on stock exchanges, while others are privately owned.
There are two main types of cannabis growers: medical and recreational. Medical growers produce cannabis for patients who have been prescribed the drug by a doctor. Recreational growers produce cannabis for adult consumers who purchase the drug for personal use.
The majority of cannabis growers are located in North America, with Canada being a major center for cultivation. The United States is also a major produc er of cannabis, with several states having legalized the cultivation and sale of the drug for both medical and recreational purposes.
processors
Processors turn the raw cannabis plant into products like oils, edibles, topicals, and shatter. As such, they are an important cog in the legal cannabis industry machine. These companies work with growers to source their materials and then use extraction techniques to create their various products.
There are two main types of processors: large-scale processors and small-scale processors. The former usually contract with growers to buy their materials in bulk and then process them into products that are sold to retailers. Small-scale processors, on the other hand, usually work with smaller growers or cultivate their own cannabis to produce their products.
The processor market is currently dominated by a handful of large companies, but there is still room for small-scale processors to compete. Some smaller processors have found success by catering to specific niches or segments of the market. For example, some companies focus solely on producing oils while others specialize in edibles or topicals.
When investing in cannabis stocks, it’s important to keep in mind that the processor market is still in its early stages of development. As such, there is a lot of potential for growth and consolidation within the industry.
retailers
Cannabis retailers are companies that sell cannabis and related products to consumers. In most cases, these companies own and operate physical storefronts where customers can browse and purchase products. Some retailers also sell their products online.
The retail sector is one of the most important segments of the cannabis industry, as it is responsible for generating the vast majority of revenue. Retail sales of cannabis are expected to reach $32 billion by 2022, according to a report from Arcview Market Research and BDS Analytics.
The retail sector is also home to some of the largest and most well-known cannabis companies, including Canopy Growth (WEED.TO), Aurora Cannabis (ACB.TO), and Aphria (APH.TO). These companies dominate the Canadian market, but there are also many smaller retailers that operate in both Canada and the United States.
In addition to retail sales, some cannabis retailers also offer other services such as consulting, events planning, and product development.
How to Invest in Cannabis Stocks
Investing in cannabis stocks can be a great way to make money, but it can also be a risky venture. Before you invest, you should do your research and understand the risks involved. This section will cover everything you need to know about investing in cannabis stocks.
Public companies
If you’re looking to invest in cannabis stocks, there are a few different ways to do it. One way is to invest in public companies that have some involvement in the cannabis industry. These companies might be involved in the production or sale of cannabis products, or they might provide services to the industry.
Here are a few examples of public companies that have some involvement in the cannabis industry:
-Aurora Cannabis (TSX:ACB) is a producer of medical and recreational cannabis.
-Canopy Growth (TSX:WEED) is a producer of medical and recreational cannabis.
-HEXO (TSX:HEXO) is a producer of medical and recreational cannabis.
-The Green Organic Dutchman (TSX:TGOD) is a producer of organic medical and recreational cannabis.
Private companies
Most of the big money in cannabis is still being made by private companies, which have been reaping the benefits of early entry into the market and a lack of regulation. Investing in these companies is not as simple as buying shares on the stock market, however. Private companies are not required to disclose their financial information to the public, so it can be difficult to assess their true value.
If you’re interested in investing in a private company, you’ll need to do your homework. Try to get as much information as you can about the company’s financial situation, business model, and growth plans. You can also look for industry reports that give insights into the overall health of the cannabis industry. With this information in hand, you’ll be able to make a more informed decision about whether or not investing in a particular company is right for you.
The Risks of Cannabis Investing
Although cannabis stocks have been on the rise in recent years, there are still a lot of risks associated with investing in these types of companies. For example, the cannabis industry is still largely unregulated, which means that there is a lot of financial risk involved. In addition, the legal status of cannabis is still changing in many parts of the world, which could have a negative effect on the industry as a whole.
Regulatory risks
The cannabis industry is growing rapidly, but it remains largely unregulated. This means that there are certain risks associated with investing in cannabis-related companies.
The most significant regulatory risk facing the industry is the possibility of a crack down by the Trump administration. While the Obama administration took a hands-off approach to enforcement of federal cannabis laws, the Trump administration has indicated that it may take a different approach. This could lead to increased enforcement action against cannabis companies, which could have a negative impact on their business operations.
Another regulatory risk facing the industry is the possibility that states will impose strict regulations on the cultivation and sale of cannabis. This could limit the ability of companies to operate in those states, and would likely result in higher costs for compliance.
Finally, there is always the risk that Congress could pass legislation that would adversely affect the cannabis industry. For example, Congress could pass a law that would make it illegal for banks to do business with cannabis companies. This would make it very difficult for those companies to obtain financing and could lead to them shutting down operations.
Market risks
The cannabis industry is growing rapidly, but it is still relativelynew and uncertain. This means that there are many risks associatedwith investing in cannabis stocks.
Here are some of the main risks to be aware of:
-Uncertainty: The future of the cannabis industry is uncertain, as itis dependent on changes in legislation. There is a risk thatcannabis could be legalized at a federal level in the US, whichwould lead to increased competition and lower profits forcompanies operating in the industry.
-Company-specific risks: Many companies in the cannabis industryare small and have limited operating history. This makes themmore risky compared to larger, more established companies.Additionally, many cannabis companies are not profitable yet, soyou could lose all of your investment if the company goesunder.
-Volatility: The stock prices of cannabis companies can be veryvolatile, making it difficult to generate consistent returns frominvesting in this sector.
Operational risks
Operational risks are risks that are specific to the cannabis industry and include, but are not limited to:
-Lack of access to banking services and capital due to federal prohibitions
-Lucy Sky is one of the first fully vertically integrated hemp and cannabis companies in Colorado, meaning they control the supply chain “from dirt to door.” This gives them a competitive advantage because they don’t have to rely on third-party suppliers, which can often be unreliable or unable to meet demand.
-Different state and local regulations surrounding cultivation, processing, distribution, and retail sale of cannabis
-Cannabis companies are subject to intense regulatory scrutiny regarding their marketing practices
