Marijuana stocks, the financial industry’s best kept secret until recent times. Far gone are the days where you had to be a day trader or work in the financial industry to get ahead in the stock market. The marijuana industry’s valuation has reached roughly $7 billion and is continuing to grow at rapid rates. With the marijuana industry still in its developing stages, now is the time to get ahead and begin investing in the companies in the marijuana market. This is where the phrase, “the early bird catches the worm” applies.
Moving on to categorize some of the different publicly traded divisions of the marijuana industry.
Category 1- Growers/Suppliers
Without the growers, there is no product. As with any other type of industry in their beginning stages, the manufacturer is of high importance. Makes sense, right?
In Canada, there is ample opportunity for this business category. The country had legalized medical marijuana back in 2001 and is now moving towards full legalization, or legalizing the recreational use, as soon as July of 2018. To control the anticipated increased demand for the product a surge of growers has emerged.
Canopy Growth based on its valuation, or market capitalization, is the leader of this category. Canopy Growth continues to grow like a weed, no pun intended. Mainly from purchases of companies overseas since the Canadian government has a licensed it to export a portion of its product. The company has doubled its quarterly revenues this reaching 15.9 million Canadian dollars or $12.7 million USD.
Other notable suppliers in this growing and supply category are Aphria, Aurora Cannabis, and MedReleaf.
Category 2: Biotechs
Did you know that there are chemical compounds in marijuana, or cannabinoids, which provide medicinal effects? If you answered yes, you would understand why numerous biotech companies are creating more and more therapies to make use of the natural compounds. If you answered no, now you know why these companies are pursuing the use of cannabinoids.
GW Pharmaceuticals, a development-stage biotech, is the front-runner of this category. It’s product Sativex has obtained approval in 16 markets and is awaiting 12 more. The drug is a spray medication to treat spasticity in patients with multiple sclerosis. Epidiolex is another product the company is developing against two types childhood epilepsy. Although GW Pharma’s stock has been volatile, if Epidiolex delivers the stock may as well.
Other notable biotech companies that focus on marijuana chemical-based treatments are Arena Pharmaceuticals, Axim Biotechnologies, Cara Therapeutics, Corbus Pharmaceuticals, Insys Therapeutics, and Zynerba Pharmaceuticals.
Category 3: Everything else that marijuana related
This last category is broad as it encompasses everything else that you may or may not even think may relate to the marijuana industry. The leading company for this category is Scotts Miracle-Grow.
The main reason you believe that Scotts Miracle-Gro is related to marijuana stocks is because it helps the plants grow, right? Not entirely. Hawthorne Gardening, which is owned by SMG, is a hydroponics provider. Hydroponics (growing plants in water) is a farming technique for marijuana crops. CEO Jim Hagedorn of SMG reported that Hawthorne’s earnings have “significantly exceeded expectations.” The company reported a 21% growth in sales during the third quarter.
Other companies to look at in this category are Medical Marijuana, Inc., a fund made up of marijuana-related companies and Cronos Group that owns marijuana related companies as well.
Moving on to the risks…
As with any other stock there are the basic risks involved. The main caution you will face with marijuana stocks is marijuana’s legal status. In the U.S., medicinal marijuana is legal in over half of the country and full legalization has now reached eight states. Federally, marijuana remains illegal although it doesn’t seem like that is going to be the case much longer. And, despite Canada’s plans to have full legalization next year, it is not legal right now.