Courtesy of Benzinga.
Marijuana as an investment class began to pick up steam in 2014. Interest in the sector continued to increase with the increased possibility of more and more states legalizing the use of medical marijuana.
As of now, 29 U.S. states and Washington, D.C., have legitimized the use of medical marijuana, although the federal government has yet to approve its usage, citing limited clinical trials to prove the drug’s medicinal value. Washington, D.C. and eight states have approved recreational marijuana.
A Lucrative Market Opportunity
The investment promise pot holds is backed by an enormous market opportunity. Marijuana sales in North America totaled $7.3 billion in 2016, according to Arcview Market Research/BDS Analytics. That number is expected to grow 33 percent to $9.7 billion in 2017. By 2021, sales are estimated to soar to $24.5 billion, representing a compounded annual growth rate of 28 percent.
Canada has already legalized medicinal marijuana and is on track to make recreational marijuana legal by July 2018.
The Methods Of Marijuana Investment
Investors can stake a claim to the opportunity presented by this sunrise industry through several avenues:
Pure-play marijuana stocks chosen after careful investigation and vetting. GW Pharmaceuticals PLC- ADR (NASDAQ: GWPH) is one such company based in the U.K. that develops cannabis-based drugs. The company’s Sativex, its only product on the market, is used to treat spasticity in multiple sclerosis patients.
Cannabis ETFs such as the Horizons Marijuana Life Sciences Index ETF, which replicates the performance of the North American Marijuana Index.
Mainstream biopharma companies with a cannabis-based drug in the market such as Insys Therapeutics In (NASDAQ: INSY), which sells Syndros, a liquid formulation of cannabinoid dronabinol, used for nausea and vomiting in AIDS and cancer patients.
Stocks of companies exposed to the cannabis industry such as Scotts Miracle-Gro Co (NYSE: SMG), which recently bought businesses that facilitate hydroponics.
See also: Investing In Marijuana: Cannabis Industry Raises Hit $1.8 Billion, Up 150% Year Over Year
Marijuana Investing: Not Without Adverse Effects
The marijuana sector is not only competitive — there’s also the threat of a federal crackdown, which could happen anytime, given that the stances of the fed and the states on pot are at odds.
The massive opportunity has attracted several companies to the sector, although most of them are without a sound business model and credible operations. The stocks of these companies often do not trade on the main exchanges and instead trade as penny stocks over-the-counter, with thin volumes — a perfect recipe for disaster.
Notwithstanding these pitfalls, some marijuana stocks did well in 2017, justifying the faith investors put in them.
2017’s Blazing Marijuana Stocks
- VILLAGE FARMS INTL (OTC: VFFIF): +414.2 percent
- EMERALD HEALTH TH (OTC: EMHTF): +299.8 percent
- AURORA CANNABIS IN (OTC: ACBFF): +221.5 percent
- CRONOS GROUP INC (OTC: PRMCF): +214.8 percent
- APHRIA INC (OTC: APHQF): +206 percent
- CANOPY GROWTH CORP (OTC: TWMJF): +150 percent
- Arena Pharmaceuticals, Inc. (NASDAQ: ARNA): +119.4 percent
Village Farms
Village Farms is a greenhouse company that seeks to capitalize on the weed frenzy by venturing into the production of medical marijuana in Canada. Moving away from its core business of growing cucumbers, tomatoes and the like, the company struck a partnership with Emerald Health in June to use one of its greenhouses in Vancouver to grow marijuana, with the converted unit named Pure Sunfarms.
Since the announcement of a second site for growing medical marijuana in Delta, British Columbia in mid-September, the stock has spiked sharply.
Emerald Health
Apart from its partnership with Village Farms, Emerald Health recently announced that its Vine Labs unit, a joint venture with Abattis Bioceuticals, had its dealer’s license amended by Health Canada, allowing it to transport, deliver and offer items to other licensed dealers, opening up a downstream opportunity for the company.
Vine Labs is already in possession of a license for analytical testing, extraction and import/export of cannabis products.
Aurora Cannabis
Aurora Cannabis, a supplier of medical cannabis in Canada, has initiated steps for an international expansion, especially to countries such as Germany and Australia. To cement its market positioning further, the company recently announced plans to buy Canadian marijuana grower CANNIMED THERAPEUT (OTC: CMMDF).
Cronos Group
Cronos Group is a Canadian investment firm with exposure to the marijuana industry through its ownership of and stakes it has built up in Canadian medicinal marijuana companies such as Peace Naturals (full ownership) and HYDROPOTHECARY COR (OTC: HYYDF) (a strategic stake).
Aphria
Aphria, which grows as well as retails medical marijuana in Canada, has ventured into exporting overseas. The company recently announced a deal to supply medical marijuana to Canadian pharmacy chain Shoppers Drug Mart.
Canopy Growth
Canopy Growth, both a producer and supplier of weed, has been a product of many M&A transactions and is heavily reliant on inorganic growth. Constellation Brands, Inc. (NYSE: STZ) recently announced a deal to buy a 9.9-percent stake in Canopy Growth for $191 million, as the former is exploring the option of bringing cannabis-based drinks to the market.
Arena Pharma
Arena Pharma has non-cannabinoid drugs in its pipeline such as Etrasimod, while its APD371 is an orally available agonist of the cannabinoid receptor 2, or CB2 receptor being studied for potential development in several indications, including pain. This compound, through its selectivity, is designed to provide pain relief without psychotropic effects and without the potential for dependence or abuse.
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