The cannabis market has remained extremely lucrative as new policies and the changing public perception of the drug all take effect. The past year or so of the cannabis market has seen many stocks increase greatly in value due to speculation as well as the underlying value of the companies. Many have begun to compare the cannabis market with that of the energy industry due to the changing factors lying beneath both.
According to one report on an ETF for the cannabis market “Last week, Horizons ETFs Management Canada Inc. released the latest findings for its Sentiment Survey report, which asked Canadian investment advisors if they expect their returns to be bullish, bearish or neutral on 14 asset classes for Q3. In Q2 of 2017, the team began tracking advisor sentiment for marijuana and the 2018 findings show that sentiment for marijuana was bullish in Q1, bearish in Q2 and is now bullish again in Q3. Investors are betting on the revenue potential from the Canadian recreational market when marijuana becomes legalized on October 17.”
The exciting news of recreational legalization of cannabis has meant that many stocks have jumped up due to this speculation. The real value behind the law is hopefully to come in the future as recreational cannabis is actually able to hit the market. Mark Noble, SVP of sales strategy stated recently that “You have to assume that at some point in October there will be some sort of euphoria that will hit the news. It’s sort of like an Apple launch and we’ve never really seen that in the investment marketplace. We’re really treading new ground in terms of what this means from an investment standpoint. Most of the time when we are looking at investments we’re trying to get into the brass taps of their balance sheets and determine what the stocks are actually going to do.” Since the market is so new, none of this has been seen before, and therefore, the hopes are high that the industry will continue to respond in a positive manner that it has already been seen to do.
He continued to state that “With marijuana stocks, you’re betting on a concept or idea rather than a reality of what these companies are actually doing right now. From an evaluation standpoint, these companies are extremely expensive but they are betting on a brand new sector that’s never existed before.” This idea completely coincides with the fact that the market is still very much in its infant stages which means that there is a lot of room to grow before any intrinsic value can be given to these stocks in the long term. Right now, it seems as though one would be betting on the future of the market rather than the short term potential.
The energy sector also presents a very interesting case as it has been around for most of the time that these stocks have been around, but many things are changing in the market. Energy as a sector in Canada has been reported to be one of the worst performing sectors for the past five or so years due to the decrease in the prices of energy. It seems as though the similarity arises that anyone investing in the energy sector would be investing in the future of technology growth in the long term rather than again, for short-term gains.
The cannabis market is as stated before, still very much in its infant stages which means that there is a lot of room to grow as we move toward the near future.
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