Should You Buy Marijuana Stocks in 2019?
April 19, 2019
There is a strong likelihood that when you think ‘marijuana’, you don’t immediately think, ‘let’s invest.’ In several parts of the world, possession of marijuana is still a misdemeanor punishable with prison time. However, this isn’t stopping a surge in investment in legal cannabis production.
At present, several celebrities are on record as having invested in marijuana stocks. These include the likes of Gwyneth Paltrow, Martha Stewart, and even former Speaker of the U.S. House of Representatives, John Boehner. The only question is, should you be following suit?
Separating Marijuana Facts from Fiction
First and foremost, investing in marijuana stocks is legal. More importantly, many early investors made significant gains in 2018, by snapping up the likes of Canopy Growth (CGC) stock options. Scams do exist, and some stock options should be avoided. However, investing won’t result in criminal penalties.
Marijuana Production is a Legitimate Industry
Canada, several U.S. states, several EU countries, and even the former Soviet Republic of Georgia, have all recently moved to decriminalize cannabis. Moreover, many credit legalization of cannabis in Canada in 2018, as the catalyst for growth in the marijuana investment sector. However, legal pot production doesn’t focus on the cultivation of marijuana for recreational purposes. (At least not exclusively.)
Medical Marijuana Industry Growth Forecasts
In 2018, CGC stock prices and other marijuana stock prices, were buoyed by growth in the medical marijuana market. More importantly, medical marijuana market growth shows no sign of abating any time soon.
In August last year, Global Market Insightspredicted that the U.S. Medical Marijuana Market will grow by 36% year on year between now and 2024. This is predominantly thanks to increasing therapeutic use of marijuana across the medical spectrum.
Recent surveys in the U.S. also show that 60% of the public is in favor of broader legalization. If this happens, more medical marijuana dispensaries will result in increased demand, further benefiting stock prices.
How to Buy Marijuana Stocks in 2019
Recent CGC stock (and other marijuana stock price booms), have resulted in some likening marijuana stocks to Bitcoin. With this in mind, it is crucial for retail investors to exercise due diligence when investing.
As stands, the legal marijuana production industry is made up of two groups of players.
On one side, legal marijuana production companies are made up of experienced management teams with years of horticultural, marketing, and financial management experience. On the other, startups led by teams with fewer years of experience can be said to be riding the industry’s coattails.
Thankfully, there are ways to mitigate risk when investing.
Steps to Mitigate Risk When Investing
Don’t Invest in Just Any Marijuana Stock: Most of today’s most popular marijuana stocks are made available by non-U.S. marijuana production companies. With most companies based in Canada, investors can perform background checks with relative ease. However, with companies based further afield, this can be more difficult. When this is the case, investing should be avoided.
Remember the Industry is Still Driven by Speculation: The likes of Tilray stock and CGC stock options, have proved lucrative to early investors. However, it is essential to remember that industry growth forecasts are still speculative. Investors should, therefore, diversify investments and never risk more than they can comfortably afford to lose.
Research Companies Thoroughly: Ideally, new investors in marijuana production companies should research each thoroughly. This means researching what assets companies own, as well as the legislative environments in which they operate.
Should You Buy Marijuana Stocks in 2019?
Global Insights believes that the legal marijuana production industry will reach $55 billion in value by 2024. Investing in marijuana stocks today could, therefore, prove extraordinarily lucrative. At the same time, though, it is essential to remember that marijuana is still considered illegal by the U.S. Federal Government. Many believe that this may change. However, broader legal contexts do need to be taken into consideration when investing.
So what is on your watchlist?
What are your current ideas for stocks? Do you have more ways to come up with good investing opportunities? Let us know in the comments below!