There is no doubt that the marijuana stock market has been quite volatile for around a year now, but as the infancy of the industry begins to wear off, what can investors expect from this quickly shifting market?
2018 was an incredible year for cannabis as Canada legalized the use of recreational marijuana, and many states in the U.S. decided to legalize its use domestically. Of course there are still issues at the federal level when it comes to the U.S. industry on marijuana, but things do look to be panning out.
One of the biggest changes that we saw this year was the $4 billion investment into Canopy Growth (NYSE:CGC) from the alcohol distributor, Constellation Brands (NYSE:STZ). Not only was this quite a large milestone for the industry, but it also monetarily represented a new shift towards trusting in the future of cannabis. Other investments quickly began to follow and we are still seeing this as one of the trends in the marketplace.
One of the exciting aspects of the newfound stability is that many believe the marijuana bubble has already popped. Some stocks saw there prices shoot up in the double or even triple digits over the course of the past year, but since that time valuations have begun to settle down. This has allowed a decent bout of stability to hit the industry, as companies continue to find their stride. Many of the most popular stocks in the market have also stabilized after hitting extremely high highs, and then bouncing back to more appropriate prices.
This has resulted in valuations that are much more accurate for those looking to invest. Of course, some may have benefitted off of the bubble that existed, but the true gains are hopefully meant to come in the long term.
The Green Organic Dutchman (TGOD) illustrates this in its price action as one of the leaders in the market. TGOD is one of the largest growers of cannabis in the industry, and has seen its price stabilize somewhere around its true value. With a market cap of over $835 million at the time of writing, TGOD has worked to become one of the key players in cannabis. The company operates by producing organic cannabis products such as dried weed, oils, edibles and seeds. TGOD can presumably be watched in correlation with the rest of cannabis as its price action usually reflects the greater industry.
Companies in the cannabis industry are beginning to see their valuations supported by true financial data. This is something that has taken a long time to pan out as many investors have waited for large promises to come true.
One of the biggest reasons for this is as many of these companies began operations, much of their free capital was busy tied up in building manufacturing facilities as well as starting operations. Because of this, only recently are many of the top companies beginning to turn a viable profit. Hopefully this will continue as we move throughout the next year of cannabis.
Marijuana remains one of the most exciting industries of the modern day, and continues to fuel excitement among a wide variety of investors.
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