It didn’t seem that long ago when marijuana was a widely decried substance. Fast forward to today, and the industry continues to expand and flourish as legalization has become a legitimate movement with the support of the majority of Americans.
After the recent midterm elections, there are now nine states that have allowed for recreational use of cannabis, although open consumption in public spaces is not allowed. And there are now 33 states that have also approved medicinal marijuana, which has been proven to treat a wide range of problems from anxiety, depression, to even cancer and PTSD.
Of course, the biggest headline remains with Canada’s decision to become the very first industrialized nation to implement widespread legalization of marijuana, with legislation officially commencing last Oct. 17.
These major changes in stringent legislation have led to a massive boom in the industry and numbers have been staggering, such as the $11.3 million generated by cannabis sales in Aspen, Colorado, surpassing alcohol revenue. Canada is expected to see marijuana sales surpass alcohol revenue by 2020 at $6.5 billion, and is unsurprisingly in the spotlight.
This is great news for cannabis companies that work in various supply chains such as cultivation, production, or packaging, and its prospects have also caught the eyes of investors for its potential to see handsome returns.
That being said, the cannabis industry is still immature and is characterized by potential volatility, so investors would be wise to weigh out the prospects before tackling the research and preparation needed to get involved with one of many cannabis stocks.
The incredible growth and projected numbers of the cannabis industry are reasons enough to speculate on the viability of stocks.
Big name corporations certainly haven’t missed the memo, with giants like alcohol producer Constellation Brands of Corona and Modelo fame entering the scene with a $4 billion investment to claim a 38 percent stake in Canadian cannabis company Canopy Growth. With an eye on cannabis-based beverages, they also have the opportunity to fuel another $3.4 billion to gain a controlling stake.
Other companies with an already existing business model in another industry have made forays into cannabis-based operations. This expansion is a strong sign of confidence in the potential market, and investors would still be able to able to capitalize on the merits of an established business model even if the cannabis market stumbles out of the gates.
Versatile companies that operate in different parts of the supply chain along with innovative brands help promote the sustainability of cannabis products, as it continues to be developed in different directions including medicinally.
Funding for cannabis corporations as well as startups rose from $239 million in 2015 to $593 million by 2017. Medical marijuana producer Tilray was the largest provider of funding for cannabis startups in 2018, fueling $47 million into healthcare.
As Canada successfully transitioned to full legalization of cannabis use, many companies are rapidly expanding and developing production and operational capacities to meet the rising demands for cannabis products. This will result in ever more brands hitting the market, with the already established names potentially going public with strong results.
Hold the horses
As U.S. based cannabis companies aren’t usually located on established exchanges such as the NYSE or NASDAQ, credibility can be an issue as many are listed on OTC (Over the counter) markets. These bypass the services of an exchange and lead to direct transactions between buyer and seller, which can be characterized by less relevant financial information and credibility that can be critical to making a strategic decision.
Of course, most would agree that the primary issue regarding cannabis stock involvement is the simple fact that it is still illegal on the federal level as a Schedule 1 substance.
Another major challenge is the fact that cannabis companies face lofty tax rates due to involvement with a federally illegal substance according to Section 280E. This is further compounded by the inability to access financial services due to institutions avoiding business with corporations involved in federally illegal activities. Cannabis businesses are forced to deal with cash transactions, which is obviously a risky proposition.
Plethora of options
For those still a bit wary of getting involved in cannabis production stocks, there are several other options. As the cannabis industry and its consumer base continue to make large strides, cannabis products are marketed in every increasing way for their health benefits.
One such derivative gaining major popularity is CBD, or cannabidiol, which has been studied for its effective properties in treating disorders such as Dravet syndrome and Lennox-Gastaut syndrome, rare forms of epilepsy. CBD was instrumental in developing Epidiolex, the very first FDA approved cannabis medicine on the merits of several research studies.
Investing in CBD can be a solid alternative to those unsure of the prospects and legitimacy of marijuana stock, and PotNetwork Holdings, Inc. (OTCMKTS:POTN) is one of the premier brands in the sector. The CBD enterprise extracts quality CBD from organic hemp, which includes minuscule amounts of THC and makes CBD non-psychoactive. This allows CBD businesses like POTN to avoid the relative legal uncertainty of the cannabis market, with hemp also on deck for potential legalization.
It is used in their large product line featuring edibles, vapes, tinctures, and other forms of CBD consumption.
Harbinger Research conducted a study on POTN’s promising stock forecast, highlighted by their rapid growth from $214,000 in 2017 to $9.662 million. Their net profit is predicted to exceed $34 million by 2020, as the company continues to shatter year-to-date numbers. POTN’s expansions into other areas such as pet CBD products and wellness capsules formulated by professional pharmacists help boost its attractive portfolio that already contains major names like Diamond CBD.
Not only that, POTN is dedicated to uplifting the image of cannabis use, especially in terms of its medical use. Next year, the company is expected to launch an information drive to educate the general public about the facts and myths of cannabis use, especially when it comes to CBD.
POTN plans to do this by setting up information booths and kiosks in malls that also aims to widen their customer base, although that will be a secondary goal. According to POTN CEO Kevin Hagen, “as everyone knows, millions of people frequent their local malls each week. We perceived this as an opportunity to simultaneously broaden our distribution footprint, and spike consumer brand awareness and preference. As a result, we are embarking on a program to roll out early next year, where dedicated kiosks and merchandising carts can be placed within major malls across America, starting in our own backyard of South Florida.”
While the cannabis industry will certainly be under speculative interest by investors, some have already dove in on several stocks featured throughout secondary stock exchanges. It is an appealing investment venture, but those looking to get involved need to be aware of the relative risks and rewards that can be potentially gained from the rapidly growing sector.