Any stocks trader will tell you that it’s impossible to predict with certainty what the exact position of an industry will be in the future. This is not different for the Cannabis industry. However, this doesn’t mean that you’ll have to invest blindly. You can use news to help you understand what is currently happening in the industry and what it means to future market trends.
What News is Relevant for Forecasting Pot Industry Performance?
Before you can rely on any news for your analysis, it is important to understand whether that information has any tangible impact on the industry. This takes us to the point of investigating what the key drivers of the industry are.
For starters, cannabis is still classified as an illegal drug in many jurisdictions around the world. However, this changing as countries start to legalize medical and recreational use of marijuana. This means that news on increased legalization or illegalization of the commodity could increase or hinder the growth of the industry respectively.
The supply chain of the cannabis industry has various players. These include the growers, ancillary firms, and the pharmaceuticals. According to Forbes, one of the huddles cannabis startups are facing is access to funds to expand their operations. Moreover, it requires huge investments to produce final products that meet the requirements of legal marijuana. In this case news of mergers or companies raising capital through venture capitalists are worth noting. Such moves are important in positioning the beneficiary companies for growth in the future.
Medical marijuana is largely driven by research and testing. Any news of research breakthroughs such as the discovery of a new cannabis strain that is more potent and has more applications will definitely increase the value of the company.
Moreover, government policies on taxation and product regulations could affect the industry positively or negatively. For example, imposing high taxes and overly strict standards of cannabis products can stifle the industry. However, offering incentives on taxes would mean that more firms would achieve profitability thus setting the industry on a growth path.
Linking Information to Tangible Market Performance
It is important to note that some news such as global legalization of marijuana can generally lead to the growth of the industry. However, factors such as lack of funding and underdeveloped supply chain can lead to the dismal performance of individual companies.
Therefore, successful analysis of the performance of the industry will depend on careful consideration of both macro and micro-environmental factors of individual industry players.
For instance, if you wish to invest in a particular cannabis startup, you will look at factors that shape the industry such as legislation and globalization of industry best practices.
When you are convinced of a positive outcome, you will then look at the issues surrounding the operations of the specific company. These could be capital base, existing contracts, and partnerships, as well as the development of quality products.
What it comes to using news to predict the future of cannabis stocks, you will need to consider issues that touch on critical catalysts that can affect the market performance positively or negatively. This will necessitate that you have a closer look at both the macro and micro business environments of individual firms for a better judgment.