Investing in the Growing Cannabis Industry
The marijuana industry is growing rapidly with sales expected to reach $25 billion by 2021. With this quick growth, many people are thinking of jumping into the industry by investing in the marijuana-based businesses, and when they think of investing in marijuana their minds swiftly move to stocks as the preferred investment. As with any investment, there is risk involved and cannabis stocks, as they are still yet unproven, are not an exception. But, find yourself the right investment at the right time and you could see a nice return, and keep the long game in mind when thinking of investing in cannabis.
There are a few ways in which you can invest in the cannabis industry from being directly involved with a business that sells or distributes marijuana to investing in an ancillary company which has no contact with selling marijuana. Instead, these ancillary company’s sell items such as glass, containers, and packaging. There are also opportunities to invest in consulting services and holding companies or pharma and biotech companies which are making cannabinoid-based drugs.
Each industry has its own set of risks when it comes to investments. Cannabis stocks are inherently more volatile than any other stock as marijuana is still federally illegal, and we do not have historical data to rely upon for decision making. Laws and business models keep evolving as we move through these dynamic times, and many companies are betting that future sales will make them profitable.
Research is key to any investment you make. Read the SEC filings and the latest news on sites such as Yahoo Finance, or use your social media skills to search Twitter and LinkedIn to get a feel of the companies. Some good questions to ask are What type of company is it? Medical or recreational? What are the few trends that have emerged when recreational marijuana use was introduced into the areas that were previously only medical use? Is the company diverse? Do they just sell the plant or have they branched out into edibles, oils topicals, etc.? How much can the company grow and are they capable of growth? Do they have the means and licensing to produce more and to expand reach? Is the company a leader in research and innovation that would be beneficial to others? Is the company a leader in research and innovation that would be beneficial to others?
As each day passes, legal, recreational marijuana comes closer to the mainstream. Five different polls have recently shown that support for legalization is between 59% and 64%, 97.7 % of the population lives in a state where some form of cannabis is legal, and nine states and DC have approved recreational use of marijuana among adults with more states soon to follow. Larger, established brands have taken notice of the emerging trends in the marijuana industry and the support that has grown for legalization. They are starting to see the value of making an investment in the industry. For example, Constellation Brands, the maker of Corona, has recently purchased a minority stake in Canopy Growth, a Canadian company that produces and sells medical marijuana. Investing in this type of business allows for being involved in the marijuana industry but yet one step removed.
Another alternative is to invest in real estate. This option might allow for a hands-off approach while supporting a growing industry. One such way to invest in real estate is with a fund such as the Golden Brick Investment Fund. This fund was designed to offer investors a high yield on their investment as the fund seeks out qualifying cannabis property in emerging markets, controlling the purchase cost, and then being able to provide cannabis business owners lease terms that allow the business owner to preserve their operating capital for other uses. The investors in the fund will see the return on their investment through the market rate lease rates as well as building sales.
As stated above, all investments pose some form or risk. Research is the best way to mitigate the risks involved. If you are interested in learning more about investing, send us a message.