The marijuana industry has remained incredibly lucrative for some time now, but many have wondered how safe these investments are for a less volatile portfolio. On October 17th, Canada will become the first developed nation to legalize the use of recreational cannabis, which means that the industry will likely become less volatile throughout the coming years. This legalization has been stated to add billions into the economy and as much as $5 billion after the market is fully formed.
For this reason, many have been wondering as to whether or not an investment in the cannabis space could be safe enough to have in a retirement portfolio. For those types of portfolios, usually, individuals like to see somewhere in the medium growth range, with a mix of mostly low volatility stocks. The short answer is, in the current state of cannabis, no it should not be in any low volatility portfolio, but the long answer is that in the near future, cannabis could become the investment for the future. This becomes truer as alternative ways to invest in the market also begin to appear.
One of the reasons that in the current industry, it can be difficult to predict the future is due to the impending challenges with legislation not just in Canada, but in any other country looking to add cannabis legislation. This can be extremely difficult and has taken a long time to even get to this point. This has also meant that companies have not nearly been able to become as profitable as they could if the market was as legitimate as any other. One example of this comes from the company Canopy Growth Corp. (NYSE:CGC). The company recently has received a large amount of attention for receiving the largest investment in the cannabis space up until this time, but they have not been able to guarantee any added revenue due to the cannabis legislation. Many investors have simply stated that the industry is too much in its infant stages to be able to support any guarantees whatsoever.
The other reason is that cannabis stocks have been extremely volatile, and have also made choices without keeping the investors in mind as any new industry does. The company Aurora Cannabis (NASDAQ:ACBFF), for example, chose to invest around $850 million in a high-class acquisition which has become the norm in the cannabis industry. The investment as one report states is a “$852 million acquisition of Saskatchewan-based CanniMed Therapeutics, a $2.5 billion buyout of Ontario-based MedReleaf, and a partnership with Alfred Pedersen & Son in Denmark. And it’s undertaken a massive buildout in Medicine Hat, Alberta, known as Aurora Sun. Though these moves are designed to give Aurora leverage as the largest projected producer of pot at 570,000 kilograms annually, the company has financed its expansion almost entirely through bought-deal offerings.” Although this may seem like it is not keeping the investors in mind, it has helped to make a great case for the industry in the future.
The cannabis industry as a whole has managed to stay extremely lucrative over the course of the past few months to years. The hopes are high that it can reduce its volatility, so that investors may be able to become more comfortable investing in cannabis for the long term.
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