Exploring The Untapped Potential Of Cannabis Stocks
by Arnab Dey Health Care Services 07 July 2023
The cannabis industry has witnessed remarkable growth and transformation in recent years. As legalization efforts gain momentum in the U.S. and abroad, investors are eyeing this burgeoning sector for its immense potential.
In this blog post, we will discuss why now is a good time to invest in cannabis stocks, highlight the untapped potential within the industry, and explore different avenues for investing, including ETFs and the shares of individual companies.
Why Now Is a Good Time to Invest in Cannabis Stocks
The gradual legalization of cannabis, both for medicinal and recreational purposes, is a key catalyst for the industry’s growth. Several countries and states have already embraced cannabis, and many more are expected to follow suit. As regulatory barriers continue to loosen, this emerging market offers ample opportunities for investors.
In the United States, the cannabis industry has been held back by the lack of banking services and discriminatory federal tax treatment. Both have burdened the industry with a higher cost base and unusually low after-tax profits than businesses operating in other industries. However, the possibility exists that both these paint points will be resolved in time, significantly enhancing the industry’s prospects. Senators will vote on the long-awaited SAFE Banking bill later this month, when they return from the July 4th recess.
Importantly, cannabis is shedding its historical stigma and gaining wider acceptance among the general public. As misconceptions surrounding the plant dissipate, more people are embracing its medicinal properties and exploring its potential benefits. This changing perception creates a favorable environment for cannabis-related businesses to thrive, presenting an attractive investment landscape.
Last but not least, the demand for cannabis and its derivatives, such as CBD (cannabidiol), is soaring. The medicinal properties of cannabis are increasingly recognized, leading to a surge in demand for various applications, including pain management, anxiety treatment, and sleep aid. Additionally, the expanding use of cannabis in industries such as wellness, skincare, and edibles further drives market growth and investor interest.
The Untapped Potential of Cannabis Stocks
The global cannabis market is projected to experience exponential growth in the coming years. According to various estimates, the industry could reach a value of $97.35 billion by 2026 according to a report by Fortune Business Insights. As legalization spreads and markets open up, cannabis stocks have the potential to become significant players in the global economy, rivaling established sectors such as pharmaceuticals and alcohol.
Cannabis is a versatile plant with numerous applications beyond recreational use. The industry has immense potential in medicinal research, pharmaceuticals, wellness products, hemp-based textiles, and even sustainable materials. By investing in cannabis stocks, investors can tap into these diverse avenues and capitalize on the growth potential they offer.
The cannabis industry is driven by innovation and research, resulting in new product developments and advancements in cultivation techniques. With ongoing scientific exploration, the industry is poised to uncover additional therapeutic properties of cannabis and develop novel ways to harness its benefits. Investing in cannabis stocks allows individuals to support and benefit from these ongoing advancements.
How to Invest in Cannabis Stocks
You can invest in cannabis stocks in two ways, either through Exchange-Traded Funds (ETFs) and/or the shares of individual companies.
ETFs offer a convenient way for investors to gain exposure to the cannabis industry as a whole. These funds pool together a variety of cannabis-related stocks, providing diversification and reducing risk. This is one of the best ways to get exposure to this fast-growing industry if you’re a long-term investor with a buy-and-hold mindset.
Examples of cannabis-focused ETFs include the ETFMG Alternative Harvest ETF (MJ) and the AdvisorShares Pure Cannabis ETF (YOLO). Both ETFs provide exposure to global cannabis players, present in the U.S. and overseas. If you prefer only to focus on U.S. players, you could turn to the AdvisorShares Pure U.S. Cannabis ETF (MSOS) instead.
Another approach to investing in cannabis stocks is by purchasing shares of individual growers or distributors. This strategy will allow you to focus on specific companies with promising growth prospects and unique market positions. However, you’ll need to take time to perform thorough research and due diligence to identify companies with solid fundamentals, competitive advantages, and strong management teams.
Unfortunately, few brokers provide access to these ETFs and stocks. You’ll need to turn to a comparison service like TrustedBrokers.com to find brokers through which these instruments are available. Compare fees and other service costs before opening an online trading account to make sure you are getting the best possible service. You should also consider deposit and withdrawal methods. Read user reviews and ratings to understand what their experience has been with your preferred broker.
Conclusion
The cannabis industry represents an exciting investment opportunity, with untapped potential and a favorable market outlook. As legalization efforts continue, demand rises, and public perception evolves, investing in cannabis stocks can be a lucrative option for investors looking to diversify their portfolios and capitalize on a rapidly growing sector. Whether through ETFs or individual company shares, carefully evaluate your investment goals, conduct thorough research, and stay updated on industry trends to make informed decisions.
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