Medical Marijuana, Reasons to Buy Cannabis Stocks
Do not miss this one.
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Missed opportunities.
You missed the gold rush, maybe because you were not born, or investing was a lot harder then. You missed the dot com boom, because why would anyone use the internet when there are tons of libraries around the place? Then you missed the early crypto boom of bitcoin, Ethereum, and Litecoin because in the early 2010s you thought they were useless. In the late 2010s, you thought they were already overbought. If you are that person, I feel for you, but do not feel bad just now.
Let me assume you missed the low of the 2008 financial crisis and the low of April 2020 due to the Covid-19 pandemic. Your friends boast about how they made multiples of their principal amount in a few months. You think to yourself, then what about me?
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The market is for the people.
Peter Lynch once said,
“Thousands of experts study overbought indicators, oversold indicators, head-and-shoulder patterns, put-call ratios, the Fed’s policy on money supply, foreign investment, the movement of the constellations through the heavens, and the moss on oak trees, and they can’t predict markets with any useful consistency, any more than the gizzard squeezers could tell the Roman emperors when the Huns would attack.”
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What he was saying in simple English is that market movement is not determined by what analyses and government legislation say, but by what people want. The market is moved by people, us the consumers.
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For years and years, it was illegal to smoke pot in public or grow it for consumption or for commercialization. However, because the people have always loved it and used it, it became a valuable commodity. The government was against it, parents against it, and religions forbade it, but the people were for it. It happens to all commodities; diamonds are also a great example. Diamonds are worthless because they are not rare, but people are willing to pay a penny for them regardless of what research and studies say.
Since the 1930s people have risked their lives to get high. Drug lords have made billions under the table, now pharmaceuticals are catching on the hype. For over a century, the price of cannabis has consistently increased in value, it is one of the few commodities with a strong track record before listing on the stock market.
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It is like Coca-Cola, but undervalued and unlisted.
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The price is bound to increase, Cannabis research has been going on for over a century and there are consumers who are ready and willing to pay dollars for cannabis products.
Difference between CBDs and THC.
A marijuana plant contains over 60 different chemical compounds called cannabinoids that act on the body’s endocannabinoid system. This system modulates all sorts of mind-body functions. For example, if you’re in pain it keeps your body from going haywire — this is called downregulation. It downregulates stress-related signals that lead to inflammation and pain. It also works in your immune system and elsewhere in the body.
There are two main receptors that these cannabinoids bind to, conveniently named CB1 and CB2. When a cannabinoid like THC hits the body, it acts on the CB 1 receptor and affects memory, concentration, and coordination. It gets you high. When a cannabinoid like CBD hits the body, it doesn’t act on CB-receptors but hits other, pain receptors that affect pain perception, anxiety, inflammation, and so on, thus, it doesn’t get you high.
So, of all these promising applications, CBD is most famous for its potential to treat pediatric epilepsy syndromes such as Dravet syndrome and Lennox-Gastaut syndrome (LGS), which normally do not respond to antiseizure medications. More importantly, the seizures that are inherent to children with epilepsy.
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The FDA has approved Epidiolex, which contains a purified form of CBD, for the treatment of seizures associated with Lennox-Gastaut syndrome or Dravet syndrome in patients 1 year of age and older.
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Why invest in cannabis stocks?
1. Long-term growth.
- It has a projected market cap of $75 billion by the year 2027.
- The medical use of cannabis is legal, with a doctor’s recommendation, in 35 states. recreational use of cannabis is legal in 14 states.
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This means that the market still has a lot of growth after legalization. This makes it a great time to enter the market (*) to capitalize on the legalization in the remaining states.
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2. Fear.
- There is fear to innovate in the industry because weed is not entirely legalized and other innovators face barriers due to the laws in place. Once the industry becomes free, there will be a lot of products entering the market.
3. Demand is high.
- Apart from weed being associated with pop culture, it has several medical and recreational uses. The market is already ripe with consumers just waiting for full legalization.
Now that you understand marijuana, there are promising stocks to hop on.
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Note: This is for medium to long-term investing, that is at least a year of holding.
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Stocks
1. Aphria (APHA) — About to merge with Tilray to become the world’s biggest weed company by market valuation. This makes the stock ripe enough for a long-term investment.
- Share price — 25.58 CAD
2. Canopy Growers Corporation (CGC) — The business holds 15.7% of the Canadian recreational cannabis market, and its share is increasing slowly over time.
In the U.S., its Martha Stewart brand of cannabidiol (CBD) wellness products is outselling more than 94% of other brands, meaning that it has a commanding market share in the segment. It’s also expecting more revenue from its medicinal marijuana segment in Germany, where it’s the market leader. — (Motley Fool)
- Share price — 48.77 CAD.
3. Cronos (CRON) — The Company is focused on cannabis research, technology, and product development. The Company’s portfolio includes PEACE NATURALS, COVE, Spinach, Lord Jones, and PEACE+. PEACE NATURALS a global wellness platform. The COVE and Spinach are adult-use brands. Lord Jones and PEACE+ are hemp-derived cannabidiol (CBD) brands.
The Company’s segments include the United States and the Rest of the World. The United States segment consists of the manufacture and distribution of hemp-derived CBD infused products. The Rest of the World operating segment is involved in the cultivation, manufacture, and marketing of cannabis and cannabis-derived products for the medical and adult-use markets — (Reuters)
- Share price — 15.48 CAD.
4. Tilray (TLRY) — About to merge with Aphria which is already profitable.
- Share price — $29.12.
Once you buy the stock, a wise thing to do is to hold. These markets will not make you rich overnight or in a week or a few months unless something drastic happens and the markets suddenly skyrocket.
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I do not analyze individual stocks in the medical marijuana market because I have my own bias and do not want people to go and buy stocks because I said so. This is overall market advice, meaning one should do their own due diligence before buying a stock.
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The general sentiment is that the entire market will increase in value in the coming years.
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5. Village Farms International (VFF) — Village Farms announced that it had increased its investment in Altum International, an Asian cannabinoid company, from around 6.6% to roughly 10%. This move will expand Village Farms’ reach internationally. — (Motley Fool)
- Share price — 21.53 CAD.
Credits — Seeker, FDA, Harvard, Fidelity Investments
