Cannabis-related stocks are a relatively new financial investment opportunity, one that has increased in popularity over the past few years. This change has become particularly acute as the legal environment for cannabis has continued to evolve in favor of further legalization. For many, cannabis has become a perfect investment opportunity. As such, here are three reasons why you may want to invest in these types of stocks.
What are cannabis stocks?
These types of stocks are not necessarily as easy to determine as you may think. Of course, they are stock in companies that are involved in the sale, production, manufacturing, and transportation of cannabis or cannabis-related products.
However, it’s important to remember that the definition of this type of stocks may go much deeper. Companies that are involved in the production of CBD are often considered part of this stock sector, as they develop products that are at least somewhat related to cannabis. Furthermore, the definition of this type of stocks are often broadened in order to include companies that make supplies or are involved in the transportation of cannabis products. These stocks may not even be considered as directly cannabis-related, but if there are positives or negatives to the cannabis industry, these stocks may be impacted. This has resulted in a wide array of potential cannabis-related investment opportunities.
There are a variety of companies that can be considered part of this basket of stocks. They include Aphira, GW Pharmaceuticals, Aurora Cannabis, and many, many more. Furthermore, there is also a type of stock known as ETFs, or an exchange-traded fund. This type of stock can be purchased and sold on the stock market, just like any other stock. However, they are composed of many types of stocks and often tied to a specific industry – such as cannabis. There are many types of stocks to invest in. They have the advantage of diluting the risk across multiple types of stock, often making them a safer investment, particularly for more cautious investors or investors who are putting their money into a riskier stock field.
Why investing in these stocks, long term, is a good idea
At the end of the day, investing in cannabis-related stocks presents many long-term advantages. In the short-term, there will be a lot of noise in the field. The cannabis industry has had a difficult 2020, largely due to leadership changes and the COVID-19 pandemic. However, long-term, their prospects are still bright. This is for many reasons, including:
- Public Opinion: There is no question that public opinion has shifted dramatically when it comes to the legalization of marijuana. In the mid-2000s, only 32% of people thought marijuana should be legalized, while 60% opposed such a position. Today, that number has more than flipped: 67% favor legalizing marijuana, and only 32% oppose. The number of people who support legalizing medical marijuana is even higher, with some polls showing that nearly 80% of the American public supports legalizing medical marijuana.
- Liberalizing Governmental Laws & Regulations: All of this change in public opinion has led to a liberalization of cannabis-related laws. At the moment, 33 states and Washington D.C. have legalized medical marijuana, while another 11 states and Washington D.C. have legalized recreational marijuana. Referendums in the 2020 election, as well as further legislative action, make it extremely likely that even more states will be legalizing marijuana. Furthermore, decriminalization is gaining steam in many states, with more and more jurisdictions looking to lessen criminal sentences for marijuana use. All of this is serving to further change public opinion and increase acceptance of marijuana use.
- Broadening array of products: Marijuana isn’t just a joint anymore, and there are a broadening array of marijuana-related products on the market, including edibles, creams, tinctures, and more. This can help to pull more people into the marijuana market and thus increase the industry’s sales
As noted by marijuana the stock experts at Money Morning, there are many things you should look for in cannabis stocks. These include:
- Stability in company leadership
- Long-term growth strategy of the company
- Their product offerings and the alignment of these offerings with demand and the current legal situation in the United States
- The financials and financial backing of each company
- That in the near future, not only CBD but recreational cannabis will be accepted by the masses and be legal such as west coast carts.
In the short-term, there is uncertainty and challenges, but in the long-term, the cannabis industry is well-positioned to be a solid financial investment.