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Investing in Cannabis: Should You Go Green?
In 2012, Colorado and Washington were the first states to approve the recreational use of marijuana. Since then, cannabis has been legalized recreationally in eleven states and medically in thirty. About a year ago, Canada became the largest country to legalize cannabis completely. Colorado has now generated more than $1 billion in state revenue since 2014, with almost $7 billion in total sales.
Time to Buy. This past year has sent cannabis investors on a bumpy adventure. Marijuana stocks have been gaining popularity over the past few years, as the push for recreational legalization continues. Investors poured over $10 billion into the marijuana industry in North America last year. The legal weed business is expected to see massive gains in the near future, moving from $9 billion in 2017 to $32 billion by 2020. The troubles in the market this summer added on to suppliers who were growing in illegal labs, causing a surplus of market sell orders. This situation provides a great opportunity for new lenders, as cannabis stocks are currently low and are about to see a higher valuation.
New Products. Cannabis is becoming more and more common, sending companies searching for new products and looking to develop derivative items with higher margins, such as edibles, vapes, and drinks. Canada recently approved growers to produce and sell these products, after originally only allowing bud and oil. This development will generate a lot of attention among investors, pushing cannabis stocks higher. The portfolio manager for the Cannabis Growth Fund CANNX, Korey Bauer, believes the new products will be tremendous for marijuana companies.
Below Expected Returns. Overall, the marijuana industry has not shown the profit growth that was originally anticipated. Consumer spending in the market continues to climb but weed producers are burning through investments to expand and innovate. Legal regulations and a poor performing market this summer are also to blame. Aurora Cannabis, a licensed cannabis producer, is expected to report adjusted earnings per share of C$0.047 on Thursday.
Slow Moving. The cannabis market has been volatile for investors, with the looming idea of it still being federally illegal, lenders have not seen the returns they originally hoped. Although marijuana sales have skyrocketed in Colorado and Canada, companies are spending a large amount on future growth. The time to buy is now, as cannabis stocks are down immensely and new products are soon expected to come into the market.
https://www.marketwatch.com/story/aurora-cannabis-earnings-when-does-pot-profit-actually-arrive-2019-09-10, Max Cherney, September 11, 2019
https://www.marketwatch.com/story/five-reasons-to-buy-cannabis-stocks-after-a-punishing-rout-2019-09-10, Michael Brush, September 10, 2019
https://finance.yahoo.com/news/buy-aurora-cannabis-acb-stock-222710679.html, Benjamin Rains, September 9, 2019
https://www.colorado.gov/pacific/revenue/colorado-marijuana-sales-reports, Colorado Department of Revenue, Updated August 2019
https://www.investors.com/news/marijuana-stocks-good-buy/, Bill Peters, September 9, 2019