20 Things You Need to Know About Investing in Cannabis Stocks

Scientific research is unearthing the truth about cannabis’ medicinal benefits. As new discoveries begin to surface, such as the plant’s therapeutic ability to ease the symptoms of chronic painand epilepsy, public opinion is shifting to the positive end of the spectrum. Consequently, awareness about using cannabis as a medicine is growing and some of the industry’s top players are cashing in on this opportunity by expanding their product lines. In turn, this is attracting the attention of investors.

Cannabis investments are emerging as a lucrative choice and with Canopy Growth Corp. recently being listed as the first ever cannabis company on the New York Stock Exchange (NYSE), the stock market is well and truly on fire. What’s more, many high-return pot stocks have appreciated by more than 1,000 percent since the start of 2016 – an indication that cannabis stocks possess wealth-building potential.

Want to discover if the grass really is greener on the cannabis side of the stock market? If so, there’s some things you first ought to know about investing in cannabis stocks:

1. Public opinion on cannabis is changing

Cannabis reform is spreading and investors ought to capitalize on this opportunity. According to the results of the Yahoo News/the Marist Poll, 89 percent of cannabis smokers want the plant to be legalized. Medical cannabis legalization is supported by 83 percent of Americans.

2. Many people still disagree with cannabis legalization

More support for cannabis means more revenue, which puts cannabis investors in a pretty lucrative position. However, investors must also consider the opposition. The Yahoo News/the Marist Poll revealed how 47 percent of Americans oppose recreational cannabis legalization.

3. Cannabis is illegal everywhere except Uruguay

Just because cannabis investments are piquing investor interest, you should know that cannabis remains illegal at the federal level in the U.S. In fact, the Schedule I drug has not been legalized anywhere in the world. The exception is Uruguay. On the other hand, over two dozen countries (including Canada, Germany, the Netherlands and Jamaica) permit the green stuff for medicinal use.

4. 30 states and Washington, DC have legalized medical cannabis

Let’s disregard the rest of the world for a moment and consider just how profitable the U.S. cannabis industry could be for investors. Since California took the leap to become the first U.S. state to legalize medical cannabis back in 1996, the market has extended across 30 states and Washington, DC.

5. Recreational cannabis laws have been lifted in nine states

In addition to the states that have legalized cannabis for medical use, nine states have given recreational cannabis the thumbs’ up. Keep a close eye on these markets if you’re a cannabis investor, because with Canada’s adult-use market recently having launched, industry players will likely raise their game.

6. Canopy Growth Corp. is taking the lead

Investors, listen up. Canopy, could be a very high-return cannabis stock, because once the production space expands to 5.7 million square feet, the company will be churning out 500,000 kilograms of weed annually.

7. Financing for cannabis businesses is tricky

One of the main challenges that cannabis businesses face is financing. Lack of access to basic banking services means that the road ahead is not without its speed bumps. However, if a company holds the necessary permits and licenses, investors can really cash-in on cannabis stocks.

8. Cannabis stock investors are concerned about dilution

Cannabis stocks are renowned for diluting their shareholders. Is the risk worth taking? That’s up to you to decide. Remember to diversify but not too much, as this may cause further dilution.

9. The U.S. only has one approved grow facility

The only approved grow facility in the U.S. is concealed inside the University of Mississippi, so consider potential supply constraints when investing in cannabis stocks.

10. The FDA just approved its first cannabinoid-based drug

One of the most exciting moments in medical cannabis history was recently made when GW Pharmaceuticals’ (NASDAQ:GWPH) received Food and Drug Administration (FDA) approval for cannabinoid-based epilepsy treatment, Epidiolex. The FDA’s decision will send a ripple effect across the medical cannabis industry, with new drugs expected to emerge as a result.

11. Trump has shifted his attitude in favor of cannabis legalization

He might be a bit controversial, but with President Donald Trump’s support, cannabis could be given the green light by legislators. Now that Trump has affirmed his support for state-level cannabis regulation, there’s a good chance that cannabis stock value will soar. Get in while you can.

12. Jeff Sessions hates cannabis and he is not shy about it

Although Trump has changed his tune, Attorney General Jeff Sessions has not. On January 4, he rescinded the Cole memo’s guidelines to prevent the federal government from cracking down on cannabis. State-level prosecutors can now punish people and businesses who breach the Controlled Substances Act as associated with cannabis, so investors should approach with caution.

13. Canada just legalized cannabis for recreational use

On July 1, Canada legalized weed. Notice the emergence of brand new publicly traded cannabis stocks on the Toronto Stock Exchange (TSX) as a direct effect of this. Best of all, investors are not limited to medical cannabis stocks.

14. Cannabis exports are expected to be limited

At the current time, Canada and the Netherlands are the world’s leading cannabis exporters. However, high-demand means that cultivators may be forced to source plants from outside of Canadian territory. On the plus side, Australia is expected to get involved in the cannabis export scene in the near future.

15. Oversupply could contribute to plunging pot prices

Canada is feeling the pressure to cultivate enough cannabis to meet demand. Investors should be wary, because if increased cannabis production results in oversupply, legal cannabis prices could plummet.

16. Cannabis businesses in the U.S. pay ridiculously high taxes

Tax rates for cannabis businesses in the U.S. can hit up to 90 percent. This is due the Section 280E tax code that prevents businesses from deducting normal corporate income-tax rates.

17. Weed might not get you rich

Sure, you could turn over some serious cash by investing in cannabis stocks. Conversely, your efforts may not be rewarded as you might have hoped. As companies reinvest and innovate, restricted cash flow causes earnings per share (EPS) to take a hit.

18. Ancillary cannabis businesses have profit potential

Don’t put all of your eggs in one basket when investing in weed stocks. Ancillary cannabis businesses might not come into direct contact with the cannabis plant, but their role is equally as fundamental as the role of a cultivator.

19. Returns tend to be higher on oils and extracts

If you want to diversify your investment portfolio, do it with cannabis oils and extracts. These products are taking both the recreational and medical industries by storm, so the returns are high. What’s more, these cannabis stocks can be targeted to specific audiences.

20. Many cannabis stocks are listed on the over-the-counter (OTC) exchange

Finally, take a look at the over-the-counter (OTC) exchange for cannabis stocks. Although the OTC exchange can present challenges, such as stock scams and penny stocks, the trading system is transparent and provides investors with the freedom to take a chance with smaller, less liquid cannabis companies before they become qualified to list on a standard exchange.

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About Bethan Jenkins

Bethan is a full-time wanderluster, traveler, and digital nomad with 7 years of experience in the freelance writing world. She has mastered the art of beating jet lag and using hammocks as an office for content curation.