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Are Cannabis Stocks a Good Investment?

Published on October 24, 2019 7:00 AM EST
Are Cannabis Stocks a Good Investment

As the cannabis industry skyrockets in growth, investing in pot stocks looks more appealing and more profitable every day.

The market for legal marijuana around the globe is massive, and now may be one of the best times to invest. Do you want to invest in the cannabis industry and start making money?

Are Cannabis Stocks a Good Investment

Making a good investment in cannabis stocks is no different than buying other stocks in the financial sector. The weed industry is rapidly growing, but regardless of this fact, it’s still important to do your research before making an educated investment.

Understanding the financial status of the stock, unique attributes of a company, recent performances and projections, and more are all important factors.

Understanding Stocks & Investments

Making a knowledgeable decision regarding cannabis stocks is contingent on understanding the basics of investing. When most people discuss investing, they’re referring to the process of buying stock in a company.

Owning stock is essentially the same as owning a small portion of that company. When the company is doing well, the price of your stock goes up and they may even pay out dividends to you.

If you’re invested in a company that’s struggling or losing money, the price of your stock may drop. You can make money off of stocks by collecting dividends or selling your stock at a higher price to make a profit.

The Basics of Marijuana Stocks

The legal cannabis industry is just beginning to blossom, and most marijuana companies are relatively new. For this reason, the overall value and prices of pot stocks tends to be fairly low. Since investing in this industry is relatively affordable, many beginners are drawn to these stocks.

Entrepreneurs and investors who want to test out weed stocks at a low price have plenty of options to choose from. However, that doesn’t mean that all stocks related to the cannabis industry are cheap. Some massive corporations are also involved in the marijuana market, and their stock prices are commonly higher.

Regardless of the base price, cannabis companies are incredible investments, since their value is predicted to increase dramatically over the next few years. Current evidence suggests that these stocks will continue to grow at a reasonable rate. 

How to Pick a Company to Invest In

When deciding which cannabis company to invest in, research is the most important step. Before buying any stock, learn about the company’s values, products, projections, and plans.

Cannabis companies are primarily profiting off of two substances found in cannabis. These compounds are tetrahydrocannabinol (THC), the psychoactive cannabinoid that gets you high, and cannabidiol (CBD), which has numerous medicinal properties.

When you’re investing the marijuana industry, it’s important to decide if you want to invest in THC, CBD, or both. There are also ancillary companies to invest in, which focus on the packaging, software, and chain supply of marijuana products.

Cannabis Companies To Consider For Investment

The following marijuana-related companies are great options to consider if you want to buy stock in this industry. Use this guide as a starting point to discovering stock options, but always do your own research before making investments. These companies are presented in no particular order.

Canopy Growth (NYSE: CGC)

Canopy Growth is one of the largest legal cannabis companies in the world with the most extensive global marijuana stocks. Although the marijuana industry is still young this company is massive, with a particularly strong presence in Canada. Sales are expected to grow quickly, since in 2018, Constellation Brands invested in Canopy Growth.

Constellation Brands is best known for producing beers like Corona and Modelo. They invested $4 billion into Canopy Growth with the hopes of releasing cannabinoid infused beverages together.

Canopy Growth is a powerful industry leader with a good reputation and star power backing their brand. Cannabis influencers like Snoop Dogg and Martha Stewart are partnered with Canopy Growth.

Auxly Cannabis Group Inc. (OTCMKTS: CBWTF)

Auxly Cannabis Group Inc., previously called Cannabis Wheaton Income Corp, has become a major player in the marijuana industry. This company has an enormous year over year growth, beginning from a small base in 2019.

Currently based out of Toronto, Canada, Auxly recently opened a flagship retail location for Kolab Project Inc. in Saskatchewan. Auxly also has royalty deals with growers, farms, and joint venture initiatives. This company may have some of the fastest growing stock in the marijuana industry.

HEXO Corp. (NYSE: HEXO)

HEXO Corp., previously known as The Hydropothecary Corporation, is an award-winning cannabis company based in Quebec, Canada. With a projected forecast of 425% year on year growth, this stock could be a fantastic investment.

HEXO Corp specializes in producing and selling dried cannabis flower, marijuana oil, and cannabis powder. This company creates products for both the medical marijuana community and the recreational market. 

Aphria Inc. (NYSE: APHA)

Aphria Inc. is a promising cannabis company that produces medical marijuana products and strains. Their products range across the spectrum of sativa, hybrid, and indica, making them ideal for a variety of uses and intended effects.

This company creates their own marijuana flower and extracts the cannabinoids to create potent oils. Aphria Inc. is headquartered in Leamington, Canada, but the majority of their sales take place online. Aphria is looking to create $708 million in sales in the coming year and is expecting 232% year on year growth.

Aurora Cannabis (NYSE: ACB)

Aurora Cannabis is a marijuana company with one of the fastest growing weed stocks of the upcoming year. Projections estimate a 171% year on year sales growth. Aurora produces and distributes a wide range of cannabis products, including marijuana flower, extracts, CBD products, and marijuana accessories.

Although they’re Canada-based, Aurora distributes on an international scale to 22 different countries around the globe. Aurora Cannabis has been known to pay dividends to shareholders.

KushCo (NASDAQOTH: KSHB)

KushCo is an interesting investment opportunity if you want to buy stock in a company that’s more indirectly involved with marijuana production. This company is an industry leader for the packaging segment of the United States marijuana market.

KushCo manufactures a variety of products for the cannabis industry, including vape cartridges, tinctures, bottles, and bags. Their subsidiary company KushCo Energy sells CBD products. 

Tilray (NASDAQ: TLRY)

Tilray is a cannabis company that exports products on a global scale across North America, Europe, Latin America, Australia, and New Zealand. These pioneers of production, research, cultivation, and distribution are becoming big players in the medical marijuana industry. Tilray is the first medical cannabis company to be certified by Good Manufacturing Practices (GMP).

Is Buying Cannabis Stocks Risky?

Regardless of the industry, there are always risks involved when you purchase stock. However, there are unique risks involved when investing money into the cannabis industry.

The marijuana market is still in its infancy, so there’s no history of trends to make predictions and education choices. Also, since these companies are so new, many have yet to turn a profit.

Furthermore, despite sweeping legalization at the state level, cannabis is still federally illegal. This means that the federal government could create uncertainty and instability in the market. All these factors make cannabis companies them riskier investments.

Is investing in marijuana worth it though? Getting involved with pot stocks is a choice you have to make for yourself. Cannabis has the potential to be a profitable investment, as well as a disappointing, expensive mistake.

If you’re willing to gamble on a skyrocketing new industry, you may find that cannabis stocks are worth it. Regardless of your decisions, make sure that you do ample research so that you can invest with confidence.

Are You Ready to Invest in the Cannabis Industry?

The marijuana industry is an exciting, lucrative market with tons of potential. Investing in one of these companies could be a great opportunity to get involved with the industry and make money.

What kind of cannabis company do you want to support? Always do your research and use your best judgement. As marijuana legalization spreads and profits skyrocket, now is an ideal time to invest in the cannabis industry.

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