The push toward legalizing marijuana to various degrees has really sparked a boom in the marijuana industry. According to ArcView, a cannabis research firm, the North American legal weed industry grew 34% in 2016, reaching $6.9 billion. The legal marijuana industry is expected to grow by an average of 26% per year through 2021. If this prediction ends up being correct, it means that the legal marijuana market would be worth $21.6 billion in North America by 2021.
This kind of rapid yet consistent growth in an industry is rare. This is one reason why investors are looking at marijuana stocks.
Is investing in cannabis stocks a good strategy?
A lot depends on the country in which the pot stocks are offered. An investor interested in investing in MMJ stocks needs to be mindful of the vast differences in marijuana markets in different countries–or even within a single country, as is the case in the United States.
In the United States alone, the legal marijuana market could potentially generate tens of billions in annual legal cannabis sales greatly improving the performance of weed stocks. Nevertheless, the federal government maintains pot’s strict Schedule I categorization. This means that marijuana is wholly illegal and on par with heroin and LSD–and it is dependent on the claim that marijuana has no medical value or use, a claim that has been proven incorrect time and again.
Furthermore, because marijuana is a Schedule I drug, legal marijuana businesses in the U.S. have little or no access to basic banking services. Many businesses are unable to take corporate income tax deductions as a result of selling a federally illegal substance, even if the product is legal in a particular state, such as Colorado.
At this point in time, investing in U.S.-based weed stocks might not be a great plan. However, this is not true for all countries. If you want to grow your investment portfolio and earn more green, check out the marijuana stocks that are available in Canada.
Canada holds great potential for investors in pot stocks; medical marijuana has been legal in Canada since 2001.
It is overseen by Health Canada, the Canadian counterpart of the U.S. Department of Health and Human Services. The Canadian medical marijuana industry has flourished, and, as of May 2017, eligible patient growth increased at a rate of 10% per month. In fact, the number of Canadian-based cannabis stocks were marginally profitable on medical marijuana sales alone.
In addition to legal medical marijuana, Canada is expected to have legal recreational marijuana by July 1, 2018. In April 2017, Canadian Prime Minister Justin Trudeau introduced legislation that would allow adults in Canada to legally purchase marijuana, starting in July 2018. Although it has encountered some obstacles, the bill to legalize recreational marijuana appears to have an increasingly clearer path to becoming law.
Much like their American counterparts, conservative Canadian politicians argue that recreational cannabis would make regulating “driving under the influence” offenses even more difficult to enforce. These politicians have also argued that a home-grow option, which is commonplace policy in adult-use legislation that allows adults to grow their own weed, would open the door to easier access for adolescents. However, conservatives are a minority in the Canadian Parliament, which means that their objections are likely not going to greatly impede this legislation.
Canadian law-makers are providing a great opportunity for anyone looking to invest in cannabis stocks.
The Canadian federal government arranged a two-year deal with individual provinces regarding sharing tax revenue derived from cannabis sales. Provincial officials complained about the originally proposed 50-50 split of revenue, since they would be responsible for the up-front costs associated with marijuana regulation and enforcement. Under the subsequently negotiated two-year deal, the provinces will receive 75% of tax revenue, with the federal government receiving 25%. Observers predict that legal marijuana could result in $3.7 billion to $5 billion in annual sales in Canada.
There are four Canadian weed stocks ranking at the top of market shares to include Canopy Growth Corp., Aurora Cannabis, Aphria, and MedReleaf.
Canopy Growth can be considered the “kingpin” of the Canadian marijuana industry, controlling an estimated 20% of the medical and recreational marijuana market. Canopy Growth is known for its pushes toward expanding making it a smart bet for anyone interested in investing in pot stocks.
Aurora Cannabis, currently Canopy Growth’s most significant rival for the top spot in terms of largest market cap in the Canadian marijuana market, is known for its blend of organic growth and acquisition potential. It has an ambitious project known as Aurora Sky that’s slated for completion in mid-2018. It is currently trying to acquire Saskatchewan-based CanniMed Therapeutics. If it does, the company would then be capable of an estimated 130,000 kilograms (approximately 286,600 pounds) of dried cannabis production each year.
Another top canadine marijuana company, Aphria, is focused almost exclusively on organic expansion. It also recently struck a deal with Shoppers Drug Mart, part of the Loblow Companies, to be its exclusive supplier of dried cannabis online. This seems to be very promising for Aphria’s future growth. Shoppers Drug Mart has 1,300 stores across Canada, so, this is a significant boost in visibility for Aphria. Additionally, it has the ability to export dried cannabis to foreign countries that have legalized medical cannabis, further indicating Aphria’s potential future revenue growth.
Lastly, MedReleaf, having just gone public last year, seems to be a good bet for investors who pursue pot stocks. MedReleaf has produced the healthiest profit over the past two years out of all of the four companies discussed in this article. MedReleaf produces higher-quality strains of cannabis, often used by more affluent medical patients. MedReleaf also produces extracts and cannabis oils, which are higher-price and higher-margin items.
If you want to venture into the realm of investing in weed stocks, a good bet is to start with Canadian pot stocks. This market seems poised for rapid growth after July 2018, which could mean a lot of green for you.