Could your investment portfolio reach a new high with the cannabis market?


The cannabis industry is expected to be worth $ 57 billion by 2027¹ – but you don’t need to get involved in any illegal activity to benefit.

Most countries still prohibit the supply of cannabis for recreational purposes, but many have legalized the plant in recent years for medical purposes.

This gave birth to innovative companies offering products and research. So could your portfolio hit a new high in the cannabis market?

CBD oil products are becoming increasingly popular around the world, making them a potentially lucrative area for investment.

Cannabis can be associated with coffee shops in Amsterdam or with university students, but recently more and more studies appear to claim its medical benefits as well, making the field more attractive to businesses and investors.

The most commonly used parts of a cannabis plant are tetrahydrocannabinol (THC) and cannabidiol (CBD).

THC is banned in the UK because it is a psychoactive chemical that gets people high.

However, cannabidiol, CBD or cannabis oil were legalized for medical use in the UK in 2018.

Proponents and health professionals alike claim that CBD can provide relief from conditions such as epilepsy and multiple sclerosis².

This gave birth to other CBD oil products such as foods, drinks, soaps, and creams.

An accredited laboratory must verify that a CBD product has a THC content of 0.2% or less or that it is deemed illegal in the UK.

Likewise, hemp, which comes from another type of cannabis plant, has low levels of THC and can be used to make clothing fabrics.

Hemp clothing is legal in the UK, but suppliers need a license from the Home Office to grow it.

Across the pond, some states in the United States such as New York have legalized recreational cannabis, but some only allow the use of CBD in medicine by licensed producers.

Hemp was legalized in the United States in 2018 as long as it has a THC content of less than 0.3% and its growers need a license.

Cannabis investment opportunities

More relaxed attitudes towards recreational cannabis in some countries and a race to design and manufacture products to support the medical benefits of CBD mean that many companies are trying to grab a piece of what is emerging. become a multibillion pound market.

The Center for Medicinal Cannabis says the UK CBD market is currently worth £ 300million and could grow to £ 1 billion by 2025, as new research into its health benefits comes to light.

The market is expected to be worth $ 57 billion worldwide by 2027, according to a study by Arcview Market Research and BDS Analytics, helped by more US states and other countries legalizing it for recreational use.

Investors can also share the success of some of these innovative cannabis-focused companies.

Investors should be aware that this is generally a highly speculative end of the stock market, with many risks involved. They could see stock prices skyrocket or their investment turn to ashes.

As an example of some of the companies in the industry, here are some of the publicly traded cannabis companies you could add to your portfolio.

Amyris

Amyris is a biotech company working on a vaccine for Covid, but it’s also a good example of how companies are entering the cannabis market.

She uses biotechnology to create synthetic substances and renewable chemicals and uses this expertise to create synthetic cannabinoids for health and beauty products.

The company is listed on the Nasdaq and its share price has risen 367% in the past year, but has fallen 17.75% over a five-year period.

Aurora Cannabis

One of the most well-known and prominent manufacturers of cannabis products in the United States and Canada is Aurora Cannabis.

It is listed on the Toronto Stock Exchange and the Nasdaq, serving both the recreational and medical markets.

The company has benefited from the legalization of retail cannabis in Canada since 2018 and increasingly relaxed rules in the United States, but it has suffered from declining revenues in recent years.

The company’s shares have risen 43.3 percent in the past year, but are down 64 percent over five years.

Canopy Growth Company

Canopy Growth Corporation, listed on the Nasdaq, was one of the first companies to trade and license in the United States, giving it a head start in the market.

Its market capitalization is $ 6.4 billion, and its stock price has fallen 32.95% in the past year, but has risen 195% in the past five.

Organizational chart

This Canadian company specializes in medical cannabis.

It operates in Canada and exports internationally, much of its work supporting veterans and emergency service personnel with terms that can be helped with the product.

The company is also busy developing the next generation of CBD products, offering vapes, chocolates, and powders.

The Nasdaq-listed company saw its share price rise 76.7% year-on-year and 2.1% over five.

The Cronos group

Canada is a big market for cannabis companies, and the Cronos Group, which focuses on health products, ended the first quarter of 2021 with $ 1.2 billion in cash.

It is valued at $ 2.5 billion and although it has seen share price growth of 477% over five years, it is down 9.2% from a year ago.

Tilray

Tilray was founded in 2013 and although based in Canada, it was the first licensed producer of medical marijuana to be certified by the European Medicines Agency.

The Nasdaq-listed company has a valuation of £ 3.8 billion. Its stock price is down 4.81 percent a year and has also fallen 64 percent over five years.

This reflects the uncertainty over the direction of the company after it merged with another company called Aphria in December 2020.

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Risks of investing in cannabis

There are, of course, risks in the market that could set your investment up in smoke.

Aurora announced last month that it was laying off 8% of its workforce and shutting down one of its facilities amid declining demand for recreational cannabis in Canada and a slowly changing CBD market. in the USA.

Pearse Carson, analyst at eToro, warns that this shows how volatile investing in cannabis can be, as companies are subject to limits on advertising and marketing and sentiment can change at any time on the part. legislators, regulators and customers.

Carson said: “This is in stark contrast to a year ago, when it looked like progress was being made to enter new jurisdictions around the world, especially in Europe and Australia, the demand for cannabis derivatives such as CBD experiencing massive growth.

“Investors who have watched the industry for the past several years will be used to this volatility, and more is expected as new regulations come into force, as will governments debating their own internal programs for cannabis use. . ”

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1. https://www.forbes.com/sites/thomaspellechia/2018/03/01/double-digit-billions-puts-north-america-in-the-worldwide-cannabis-market-lead/?sh=5bbf0e856510

2. https://www.nhs.uk/conditions/medical-cannabis/

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