Investing in Marijuana Stocks
The marijuana industry has been growing exponentially over the last decade, and an increasing number of companies that specialize in the sale of marijuana are emerging. Investors can put these companies into three broad categories. First, there are marijuana producers and sellers that cultivate, package and sell cannabis products to consumers. Biotechnology firms have popularized and commercialized cannabis-based treatments. Finally, ancillary firms provide products and services to companies without touching the plant. Cannabis can be medical or recreational, and many patients use cannabis to improve their physical and mental ability to function daily. On the other side, recreational cannabis is also popular and is used exclusively for enjoyment.
Is the cannabis market a growing market?First, half of Americans think governments should legalize marijuana, but it remains somewhat unpopular among older generations. Still, marijuana is legalized in 35 different states within the United States, and the current shift in political policy contributes to the desired change. At the same time, research shows impressive findings regarding medicinal weed. Marijuana is not only popular in the United States, it is also becoming increasingly popular globally. As of now, analysts expect the global cannabis market to reach an expected revenue of 33.6 billion U.S. dollars by the year 2025. In addition, the industry has faced significant improvements around legality issues, and governments and political leaders are becoming more interested in the effects of marijuana. Governments are now trying to shift addiction-based companies within the alcohol and tobacco markets, causing these companies to acquire other options and invest in the marijuana market.
What companies can I invest in?An example of a company shifting its focus from an addictive product to a market that is showing significant growth is Altria Group Inc. Altria is known for producing Marlboro cigarettes and is considered one of the major forces in the tobacco industry. As a result, investors with low regard for ESG ratings create an urge to invest in companies like Altria. Still, they’re trying to expand their business into the marijuana market, while regulations and restrictions around smoking continue to harm the business. A more known company within the industry is GrowGeneration, which specializes in farming equipment for pot. They are now one of the most popular production options in the legal cannabis market, with GrowGeneration being the biggest provider of hydroponics equipment in the United States. GRWG is expanding rapidly, with over 50 retail sites across the United States. While still without dividends, the company has reached a P/E ratio of over 100, making it an attractive option for growth investors.
The bottom line of investing in the Marijuana industryJust because a trendy new industry is getting a lot of attention and has potential for development doesn’t mean you should invest in it. If you invest in broad-based index funds, you are protected regardless of whether certain areas of the stock market do well. Conservative investors who desire minimal risk should avoid investing in marijuana stocks. However, bold investors with high-risk tolerance will likely find a lot to enjoy about marijuana stocks. The cannabis business is still in its early stages, but the market prospects are enormous, especially as more U.S. states legalize cannabis. As a result, investing in marijuana equities is a high-risk but possibly high-reward proposition.
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