A Great Sign That the Marijuana Stock Market Is Maturing

Pot Stocks Grow With New Luxury Items

One thing I’m keeping an eye on with the marijuana stock market is its maturation. That doesn’t just mean pot companies expanding into new markets and generating more revenue; it also means those companies finding new ways to develop, market and sell goods.

Recently, we’ve been seeing an explosion in the luxury market, which gives us two important, positive signals for the marijuana industry.

The first signal is that that the luxury market is beginning to become a distinct segment within the industry.

This opens up a wealth of new possibilities. Luxury items, after all, typically have a higher margin per individual sale (even if there tend to be fewer sales overall).

Marijuana companies can grow their catalogs of products by targeting luxury consumers, opening up new paths for revenue. Luxury items also offer the opportunity for more differentiation between competitors.

Many pot stocks went public during the run-up to Canadian marijuana legalization.

And while the trend of marijuana stocks going public has slowed in Canada, it has picked up in the U.S. Many American pot companies have been competing for market share in what’s bound to become among the largest pot markets (if not the largest pot market) on the planet, post-legalization.

With pot stocks proliferating—both on major exchanges and over the counter—it can be difficult for investors to suss out which ones offer the highest potential returns without taking deep dives into the companies and their financials.

This is especially true of marijuana companies that offer similar products, targeting similar customer bases. It’s a risky venture, as there’s only so much market share to go around. One marijuana stock will eventually be outdone by another, leading to potential losses.

This was echoed by Nidha Lucky Handa, chief executive officer of the Leune cannabis brand, which is in part supported by renowned NBA players Carmelo Anthony and John Wall.

“For a very long time, the only choice that a consumer had was inside the stoner meme, or the stoner-centric world,” said Handa. “Does that describe every consumer? No, not even close.” (Source: “Pot Users Splurge on $800 Bongs as Stigmas Fade,” Bloomberg, May 10, 2021.)

She’s right, and this presents a great opportunity for the marijuana market to expand in terms of products that will bring in new groups of consumers.

The second great signal for the long-term health of the pot market is that the luxury sector is only going to interest those with the cash to make luxury-style purchases.

Put simply, luxury means money, and people with money getting into marijuana means the drug is being accepted at a higher level of society.

Moreover, the rich are the same people who make campaign donations and often hold outsized influence in U.S. politics. With marijuana remaining illegal at the federal level in America, not only are the rich prevented from legally accessing their drug of choice in certain states, they’re missing out on peak investment opportunities.

There’s only so long that politicians can go against the will of the people (the vast majority of Americans want marijuana legalization in some form) and the will of the moneyed elite.

That’s a recipe for political suicide. As more people with wealth, influence, and celebrity push for marijuana to become accepted, there’s only so long that the hold-outs in Congress (or even the White House) can hold back the tide.

So what does that mean for pot stock investors?

The simple answer is that the future of marijuana stocks looks brighter every day, even if the day-to-day movement of pot stocks is dicey—or at least not always trending in the right direction.

The faster that marijuana is legalized in a major market (preferably the U.S., but Germany, France, the U.K., or a similarly sized country would do), the faster investors will likely be able to unlock the full potential of marijuana stocks.

And, to be frank, as that date approaches, the window to get in before the buzz carries pot stocks into the stratosphere edges closer and closer to being shut for good.

After all, there’s only one opportunity to capitalize on an emerging industry. Which isn’t to say that marijuana stock investors who come in after legalization are doomed. It’s simply stating that the period to invest early in order to maximize gains is finite.

Analyst Take

The marijuana market is continuing to expand in fascinating ways. With each new direction it expands in, we’re seeing new opportunities for investors.

And that’s exactly what’s been happening with the marijuana luxury market.

On its face, this new and growing segment of the market is a great way for pioneering pot companies to identify niches, target them, and maximize revenue. This also helps investors increase their exposure to the pot market while diversifying among different segments.

Consider that, during the COVID-19 pandemic, many people who held white-collar jobs saw their wealth increase while blue-collar workers by and large faced far more monumental struggles—at least as far as work is concerned.

That goes to show that events that negatively impact one segment of the population may actually leave whole other segments untouched or even better off. So having diversity in an investment portfolio—even within specific industries—is never a bad idea.

Perhaps more importantly, the growth of the luxury segment of the marijuana market also speaks to the increasing acceptance of marijuana across all strata of society.

And with there already being a large contingent of pro-marijuana voters and politicians, it can’t be much longer before federal U.S. marijuana legalization becomes a reality and we see a huge explosion in value across the pot market.