New businesses have a tendency to materialize out of the blue whenever cannabis is newly legalized in countries or states. As a result, the industry continually and reliably experiences rapid growth. As more dispensaries obtain licenses to sell cannabis products, more production is needed from businesses. As a growing industry, it’s no wonder investors are intrigued and seeking opportunities to buy in.
The good news is, there are plenty of different ways to invest in marijuana and/or cannabis stocks, either directly or indirectly.
For those who are wary of investing in marijuana, the following investment options are not simply recommendations; rather, they are opportunities for investors who believe the cannabis industry has great long-term potential and are willing to take the risk, understanding there will not likely be immediate profit. However, with patience and research, the pay-off may be well worth the risk.
One way of investing in pot stocks is through medical marijuana companies and products.
While there is no guaranteed “safe bet” when investing in cannabis stocks, the MMJ market provides investors with the most options. In the U.S. and globally, legal medical marijuana markets far outnumber recreational markets.
Some of these investments trade on major stock exchanges, in both Canada and the U.S., though most of them can be found on over-the-counter exchanges (OTC). On these OTC exchanges, trades take place through dealers rather than through a centralized network, such as NASDAQ.
Players of interest among Canadian cannabis stocks
Organigram Holdings (OTC: OGRMF) has done well as a licensed medical marijuana producer and grower, the company’s sales increasing with the country’s base of medical marijuana patients. Organigram’s strong Q2 reflected this, particularly as the company has turned its focus to higher margin cannabis oil production.
Canopy Growth Corp. (NYSE: CGC), which recently listed on the New York Stock Exchange, is one of the more popular Canadian marijuana stocks. The company researches cannabis, in addition to producing, and is valued around $4.35 billion. Close in competition is Aurora Cannabis (OTC:ACBFF), a producer that has also been aggressively expanding its facilities and recently acquired CanniMed Therapeutics.
Cronos Group Inc. (NASDAQ:CRON) was the first marijuana stock to list on a major exchange in the U.S., the NASDAQ. Cronos has been focused on expanding its international footprint, similar to Aurora. Investors might see the company’s volatility, however, as too much of a risk.
Another option for investors interested in cannabis stocks are retailers of cannabis and CBD products.
While medical marijuana is far more common than recreational, its U.S. approval rating continues to go up, with nine states plus Washington D.C. now having legalized it recreationally. And Canada is looking to finally open its doors to a nationwide legal recreational market later this summer.
Of course, legalization doesn’t guarantee marijuana companies will be profitable, as money must be spent in order to keep up with the production demand. Many marijuana stocks have been preparing for Canada’s legalization, however, through expansions and acquisitions. Scotts Miracle-Gro (NYSE:SMG) is one of these, having acquired Sunlight Supply and General Hydroponics these past several years, which produce supplies for cannabis growers.
Cannabis ETFs are another option for investing in pot stocks.
A different way to invest in marijuana is through hemp stock, focused on industrial hemp.
One way to invest in the source is to directly invest in cannabis production via industrial hemp. Hemp Inc. (OTC:HEMP) provides an opportunity for investors to get in on the ground floor. Founded in 2008, the company’s aim is to provide a one-stop shopping experience for all things related to hemp production – growing, extracting, processing and sales. A bill is in the works that would federally legalize industrial hemp, and should it pass, will give Hemp Inc. and similar companies a serious edge over the competition.
Finally, for investors wondering how to invest in marijuana indirectly – without the marijuana – there are a few options for reaping the benefits of the best cannabis stocks to invest in.
One of the smartest ways to invest in cannabis may be through a company that is only partially focused on the industry, or provides an ancillary service.
Here are a few that may be worth checking out:
- Abbvie Inc. (NYSE:ABBV): A pharmaceutical company with an FDA-approved synthetic cannabinoid, Marinol, intended to treat nausea in AIDS and cancer patients.
- INSYS Therapeutics (NASDAQ:INSY): The DEA approved this pharmaceutical company for a synthetic cannabis.
- Constellation Brands (NYSE:STZ): A successful liquor and beer company (i.e., makers of Corona) that purchased a minority stake of 9.9% in Canopy Growth.
- Kush Bottles (OTC:KSHB): An up-and-coming packaging and supplies provider for cannabis growers and dispensaries, the company does not actually deal directly with cannabis, which is attractive to some investors.
As one can see, investors interested in marijuana are not without diversity of options. With the nature of cannabis stocks being more volatile than the average stock, and its legality varying across states and countries, investors have to determine what potential they believe the future holds for marijuana – and invest accordingly.
(For more on Kush Bottles, read Investors Diversifying With Marijuana Stocks Will Want to Know About This Unique Company)