In the recent past, April 20 has become synonymous with the much-hyped celebrations of the marijuana legalization in some parts of North America. With such a dark history of being a criminalized drug around the globe, one can’t help but respond with mixed feelings.
Is there a genuine reason to celebrate over the legalization of weed and subsequent listing of pot stocks in various markets? This article tries to demystify this emerging investment opportunity and explores the opportunities it holds.
Marijuana stocks outlook
Currently, the major players in the weed industry are in the U.S. and Canada. While some States in America have legalized both recreational and medical weed, the majority have restricted to manufacturing of pharmaceutical products. Canada, on the other hand, has only legalized medical weed.
Writing for Financial Post, Kristine Owram observes that only five years after its debut, Canopy Growth has grown by over 2,139%. This is not unique to Canopy Growth Corp. Similar sweet stories continue to be told of other weed stocks such as Cronos Group Inc. At least for now, the pot stocks business seems to be on a growth path.
Factors that influence the performance of weed stocks
The performance of marijuana stocks depends on the growth prospects of a company.
A firm that invested in both recreational and medical weed distribution channels is likely to rake in higher returns. On the other hand, a competitor that invested in only one channel risks of losing their investment.
What really determines informs the decision for a company to invest in a particular distribution channel? For starters, government policy on what is legal and illegal dictates what a firm can or cannot do. Weed growers in Canada and US that have only legalized pharmaceutical weed activities, need a huge capital to produce saleable products. On the other hand, companies that produce cannabis for recreational consumers need less capital to start producing and packaging their products.
Another important factor is a company’s ability to identify strategic investors who will provide needed capital to get a business running. A good example is the recent $2.4 billion investment by Altria Group Inc. in Cronos Group Inc. Such partnerships bring financial stability to the benefiting companies. Consequently, this allows weed firms to run their operations successfully and possibly increase their production.
What does the future hold?
If the recent trend is anything to go by, more states are likely to legalize weeds. Whether this is done for medical or recreational purposes, the move is likely to bring stability in the industry. Moreover, with the opening of new markets, well-funded firms are likely to expand their operations to these regions and increase their earnings. This will see the prices of pot stocks continue to soar steadily.
The weed industry has a huge potential to grow. So, if you intend to invest in marijuana stocks, what are some of the best performing firms to watch? According to Investor’s Business Daily, some of the top pot stocks on the NYSE include Canopy Growth Corp., Cronos Group and MedMen. There may be other upcoming firms but before you make any investment, take time and analyze the past performance of public offers.