As with any new industry, there are many potential investment risks with buying cannabis stocks. Whether you’re a first-time or experienced investor, understanding how this industry works will pay off.
Our guide will provide you with the basics and includes our top choices for the marijuana stocks to invest in this year.
Cannabis Industry Climate in the U.S.
The legal cannabis industry is expected to grow exponentially over the next few years, and many investors seek to profit. As states and countries decriminalize and legalize weed, there are increasing opportunities for entrepreneurs and existing companies to invest.
The impact of the growing marijuana industry is so prevalent that the U.S. Census Bureau plans to gather and study data regarding how states use the money to improve their infrastructure and social programming with revenue from cannabis companies.
This data type will lead to more cannabis jobs and hopefully encourage federal legalization.
- In Alaska, fifty percent of adult-use cannabis sales revenue “is invested in the Recidivism Reduction Fund and supports reentry programs for currently and formerly incarcerated individuals.”
- California has distributed more than 100 million USD to community groups and local nonprofit programs that benefit people adversely impacted by punitive drug laws.
- Colorado public schools have benefitted from a nearly 500 million USD investment in cannabis tax revenue.
- Illinois dedicates a percentage of its tax revenue to mental health services and local organizations that uplift disadvantaged communities. The state’s 2021 cannabis tax revenue outpaced that of alcohol by 100 million USD.
- Washington State funnels more than half of every 1 billion USD in cannabis tax revenue into public health initiatives, including a fund that provides health insurance for low-income families.
Cannabis Market Insights
- Cannabusiness is a rapidly growing industry, according to the industry’s most recent quarterly report.
- Market size is expected to increase to USD 91.5 billion by 2028.
- This substantial increase in cannabis businesses is primarily due to increased global legalization.
- Medical cannabis users were at the top of the market in 2020 and are anticipated to remain on trend, especially when the federal government decides to legalize weed.
- The elderly population is at the top of the consumer base for medical marijuana.
- Cannabis is increasingly used to treat medical conditions such as chronic pain, anxiety, psychological disorders, cancer-related symptoms, insomnia, and more.
- North America will lead the worldwide cannabis market in 2022 as it gains popularity in the U.S. and Canada.
Weed Legality in the States
While the decriminalization of marijuana may be a great step towards reform, there is still a significant overflow of adverse prohibition effects on society. It is in the best interest of future customers if we develop and implement specific regulations on the cannabis industry.
Markets selling illicit products have little to no restriction, which could potentially have inaccurate potency information or be harmful to users. Due to being federally illegal, it is often an industry corrupted by crime, violence, and extortion.
Thirty-seven states in the U.S. plus Washington D.C. have initiated some form of decriminalization or legalization of marijuana. For American society to benefit fully from reform, it needs to be legalized federally, proving quite an obstacle against passionate opposition groups. Until that day, the stigma will remain for the cannabis industry.
What is a Cannabis ETF?
An exchange-traded fund (ETF) is a pooled investment security that operates similarly to a mutual fund. Normally, ETFs track a specific index, sector, or commodity. Still, unlike mutual funds, they can be bought and sold on the standard stock exchange.
A cannabis ETF is an excellent avenue to diversify your investment portfolio, especially in highly uncertain industries like the cannabis business.
Six Best Marijuana Stocks of 2022
Here, we give you the low down on six of the top marijuana stocks of the year.
Cronos Group Inc.
Cronos is a Canadian market group that makes various adult-use cannabis and CBD products. While Canadian cannabis shares were down by double digits last year, the company has a significant advantage.
A few years ago, the company recently announced that American tobacco giant Altria acquired 45 percent of Cronos in a billion-dollar deal and an option to buy a controlling stake in the firm. Some market analysts see the company’s relatively low share price as a reason for Altria to buy the rest of Cronos and expand to its full potential.
Innovative Industrial Properties
Innovative Industrial Properties helps solve the capital shortage for growing marijuana companies by purchasing medical cannabis operation property and leasing it back to the owners. This service is a tremendous help because U.S. cannabis companies can’t easily secure capital from banks or financial institutions since marijuana remains illegal at the federal level.
The property sale provides the marijuana operator with funds, and the lease agreements create a consistent revenue stream for IIP. Since the company is technically a real estate investment trust (REIT), Innovative Industrial Properties returns approximately ninety percent of its taxable income to shareholders.
Aurora Cannabis (ACB) arrived on the Toronto Stock Exchange in July 2017 and in New York in October 2018. In addition to producing cannabis flower, Aurora is licensed to sell cannabis oil.
This company has been around for many years in the over-the-counter market. In May 2018, Aurora Cannabis purchased MedReleaf for 2.5 billion USD and acquired organic cannabis cultivator Whistler Medical Marijuana Corporation in 2019.
Curaleaf Holdings Inc.
After establishing a place in the United States weed market with over one hundred retail stores, Curaleaf expanded its services to the European cannabis industry. Recently, the company acquired EMMAC Life Sciences Group, completing its rebranding to Curaleaf International.
The recent acquisition gives Curaleaf access to medical cannabis markets in the UK, Germany, Italy, Spain, and Portugal. When U.S. legalization happens, more opportunities will arise for Curaleaf, and their stock will continue to grow.
Green Thumb Industries
Green Thumb Industries has retail cannabis stores in twelve states and operates seventeen manufacturing sites. Green Thumb holds licenses for ninety-six retail cannabis locations, so there is plenty of room for expansion. The company’s stock also trades over-the-counter securities in the U.S. under the ticker GTBIF.
Green Thumb Industries manufactures and distributes various cannabis products through brands like Beboe, Dogwalkers, Dr. Solomon’s, Good Green, and RYTHM. The company owns retail dispensaries called Rise, operating across fifteen states.
Canopy Growth Corp.
Canopy (CGC) is one of the first companies to establish itself in the legal weed market. While the company sells its cannabis products under various brand names, Tweed is the most common due to its affiliation with Snoop Dogg. Canopy began trading on the New York Stock Exchange in May 2018.
Removal of the Weed Stigma
After studying the complex history of global cannabis use, John Charles Chasteen made an educated conclusion regarding the stigma around the marijuana industry.
He wrote that historically it has been “used by the poor, by the marginal, by the chronically ill, by the artistically and philosophically and spiritually inclined, by seekers after the meaning of life, and by social and religious nonconformists of various stripes.” (Chasteen 2016:137).
There is a noticeable global stigma around weed because outsiders have traditionally used it. While we are closer to normalization than ever, we aren’t quite there yet. Studies show that the experiences of people of color, women, and the poorer communities still deliver the results of being stereotyped due to using cannabis.
We may be on the brink of post-prohibition as a global collective, but more profound acceptance and understanding will be necessary for ultimate societal normalization.
The Bottom Line
It’s understandable to want a piece of the weed business, and some may even say it’s a smart move to invest in the cannabis industry. The good news is that there are many ways to do so without putting your eggs into one basket.
It’s a vast, ever-changing, growing market, so cannabis investors should know the risks and have an investment and allocation strategy.