We’ve all seen the toll that the coronavirus has played on the cannabis industry. In the past month, we have seen the top cannabis stocks shed more than 50% in value. But, volatility is nothing new to pot stocks. Rather, it has been around as long as the industry has. During the trading day on March 24th, we saw a large jump in prices for the first time in a while. This is characterized by Trump’s new actions on how the country will deal with the coronavirus.
But, it does seem that these gains may be short-lived. For long term investors, avoidance may just be the best strategy to investing in marijuana stocks right now. It is a difficult time to use any projections as the world is facing a tumultuous and unseen enemy. But, many are becoming increasingly excited about the future potential of the cannabis industry and others.
There are two types of investors when it comes to investing in cannabis stocks. There are long term investors who believe in the future of the marijuana industry. And, there are the short term swing traders who use volatility to make significant gains or losses. Both trading strategies have value, and both can be used at specific times. But, now it may seem like the time for the short term traders to be the only one’s trading as high volatility means watching the market like a hawk. For others, March of 2020 may be the time to sit out investing in pot stocks. At least until this financial and global mess begins to see more stability.
Marketing is a Pot Stocks Best Friend
How a pot stock is marketed can be one of its greatest advantages. With so many different cannabis companies offering similar products, marketing is something that can set a retail cannabis company apart from others. A poll conducted by the Brightfield Group recently stated that 35% of those who purchased cannabis in Canada, was not sure what the brand was of the product they purchased.
This shows that there is a strong need for branding and marketing for companies that produce a product for sale in the industry. This is more of a specific need for the Canadian market, as many U.S. pot stocks have used branding and marketing as their strong point. In Canada however, it is important to differentiate products by using proper branding. With this in mind, finding a popular cannabis company can be done in a much easier way.
Pot Stocks That Are Cash Conservative
One of the most important factors about cannabis companies right now is the amount of free cash they have on hand. In the current market, uncertainty is wildly up in the air. After months of large acquisitions, many cannabis companies are now leaning toward conservancy rather than massive cash expenditures. With so many companies in the cannabis market boasting massive amounts of free cash, the ones who are saving it have the best shot at surviving the current levels of market volatility.
Although acquisitions are not really on the table right now, we can look at the past to see what types of patterns we could see once the dust has settled. Companies that choose acquisitions over bettering their own financial models, may be ones to avoid. Other companies however that save cash and have focused on expansion through conserving funds, maybe proper pot stocks to watch moving forward.
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