For some, the idea of investing in the cannabis market – a vice market, like tobacco and gambling – may not appeal. But others may be intrigued by a market that has been legalised and is growing in the US and Canada, and that is proving popular in the UK in the form of CBD.
In an interview with Forbes, trends strategist Matthew Carr highlights how these vice markets have higher consumption during periods of economic recession, saying “I believe the sector is attractive now and after the pandemic is over”.
But do others agree? Here’s how to invest in the cannabis sector, and what to look out for.
Ways to invest in cannabis
In the US and Canada, where cannabis has been legalised, there are three main ways to buy into marijuana stocks:
- Investing in growers and producers: The places where marijuana is grown and distributed from
- Investing in drug makers: Biotech and pharmaceutical companies using marijuana as an ingredient in prescription medications
- Suppliers of marijuana-related products: Companies that don’t sell the drug itself, but may supply products such as lighting to companies that do.
Where to find cannabis stocks to invest in
In Canada, marijuana is legal throughout the country, meaning that reputable stocks should be easier to find. In the US, however, the drug remains illegal under federal law, despite its illegality in individual states.
In the UK, cannabis is only legal for medical use by prescription, although companies selling CBD-based products (a compound found in cannabis which does not include THC – the component which causes the illegal “high”) are legally allowed to trade.
There are four stocks that InvestorPlace believe will see a big rebound in the second half of 2020. In the UK, meanwhile, The Motley Fool have their eye on tobacco companies like Imperial Brands, which they believe will diversify, as well as Associated British Foods, whose subsidiary, British Sugar, has been growing cannabis for pharmaceutical use since 2016.
Michael Klein, chief executive of cannabisMD.com and God’s Greenery, believes that the stock market will see more and more cannabis brands become publicly listed in the near future. He says, “There is a lot of disruption in the market right now. Which means there are a lot of opportunities. Consumers should do their research on companies beyond recent stock performance to unlock those opportunities”.
Any investment is a risk – and the cannabis market is particularly volatile. But with CBD use on the rise in the UK, could it be a potential opportunity for braver investors?
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