The unique and new nature of the marijuana stock market has led to billions in capital flooding into such a sharply established industry. With legalization occurring throughout the U.S. and around the world in places like Germany, the successes of the industry have also led to several risks that any investor should take into account.
The headlines for the 2018 year have continued to be some of the most positive as far as the cannabis sentiment is concerned. Within this one year, marijuana has seen major breakthroughs in the way we view it as an industry. In the U.S., the population has shown an overwhelming amount of support for cannabis legalization, reflected in the political changes we saw with the past midterm elections. In Canada, the place that some consider to be the major modern hearth of marijuana, recreational legalization just took place allowing for new numbers and studies to be done on the demand for cannabis on a large scale. All of this is incredibly positive, but with anything comes various risks to be mindful of.
One of the main risks with cannabis has been the value of some of the most prominent stocks in the market. Companies such as Tilray (NASDAQ:TLRY) and Canopy Growth Corp. (NYSE:CGC) have seen massive overvaluations that have led to inflated prices and steep fluctuations within the stocks. The infancy of the market is one of the major propagators of this as it has led investors to have massive expectations for the future of the industry. Of course, this is not a bad thing and only slightly advantageous, but the sentiment remains that any investor should make sure to do their research before putting any money into cannabis.
One of the positives of this is that cannabis is a physical product. This means that the value of a business can be more accurately calculated if one is able to figure out the amount of product they are growing, and the amount of potential they have to grow a given product. Within this lies a series of questions as to what value the different stages of cannabis growth have as they can differ whether a plant is flowering or merely a seed. This may sound complicated, but the hopes are that it will pan out as the market is able to mature further.
The Green Organic Dutchman (TGOD) is one of the most prominent growers of cannabis in the whole of the industry. TGOD has been working to gain respect throughout the Canadian cannabis market as they are up against various giants with capacities ranging in the hundreds of thousands to millions of square feet of growing space. Once The Green Organic Dutchmans newest Quebec facility is completed in the middle of next year, they should be able to produce upwards of 142,000 when at full capacity. As stated before, this number can help any investor looking to find the value of a given business. TGOD is also working to move into the Jamaican cannabis space in the form of stake in the company Epican. This will not only give them access to more growing potential, but it will also give them exposure to a new and fast-paced market.
The other issue that arises in cannabis is whether or not companies are growing the full capacity they hold. Many businesses have factories in the works with the aforementioned hundreds of thousands of square feet of growing space, but the majority of them have yet to capitalize on this massive area. This means that most companies are not currently operating at full capacity. This has led to shortages in cannabis as well as increased demand for the product around the world.
These issues are characteristic of cannabis, but the industry should not be overlooked as it is still very much in its infant stages. With the coming years will likely bring a new level of stability that we have yet to see. As we continue to move throughout the future, cannabis remains one of the most intriguing markets of the modern day.
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