Cannabis is taking a turn. While the industry has been in a state of growth for awhile, in just the past few months some key stories have caused a boom in cannabis stocks. The substance is slated to become recreationally legal in Canada this month. Despite U.S. federal regulations, this has caused huge brands like Constellation Brands (who owns Molson Coors) and Coca-Cola to take a look at the cannabis industry. Even in the U.S., the Drug Enforcement Administration just ruled to reschedule some forms of CBD, allowing doctors to prescribe certain CBD-based medications.
However, U.S. laws classifying most cannabis products as Schedule I drugs leave a lot unknown for the industry. For example, Canadians who have invested in the cannabis industry risk being banned from the U.S. at the border.
Considering all of this information, the cannabis industry is in a state of growth, but with that growth there is also tension. On one hand, the industry may be intriguing to those hoping they can become early investors and make some money. However, due to the tension, they might want to err on the side of caution, choosing not to engage in the cannabis industry until regulations become more clear.
So what is the best way to break into the industry right now? Without forming your own startup in the space, investing in the cannabis stock market is going to be the easiest first step. Here, we’ll break down the risks, rewards, and everything you need to know about cannabis stocks.
How to Invest in Stocks
Let’s start with the basics. Maybe you have never even thought about investing in stocks until you heard about this mysterious cannabis boom. Now you’re paying attention and want to build an investment portfolio. For one moment, forgetting cannabis stocks, how does one invest in any stock?
Well, first thing is first: you need to open up a brokerage account. In order to trade stocks, you’ll typically use an online brokerage that will allow you to buy and sell. For the casual investor, there are easy-to-use apps, such as Robinhood, that allow you to buy, sell, and monitor stocks with a push of a button. There are other web services like Vanguard that might be a bit more complex, but provide more options. In reality, in the Information Age, it hasn’t been easier to break into the stock market and set up a brokerage account.
It’s most important that you understand your broker before committing. You’ll want to evaluate them based on a variety of factors: costs (trading commissions, account fees, etc.), investment selection, and investor research and tools.
Once your account is setup, you’ll probably want to set an investment budget. Now, this will vary greatly. Cannabis stocks, and stocks in general, will differ in pricing, some being worth a few dollars while others are worth hundreds. A common rule is that only around 10 percent of your portfolio should be invested in individual stocks, so keep that in mind when building yours and putting money into individual cannabis stocks.
Investing is full of complex strategies and approaches, but many people have found success by simply sticking to the basics. If you are a beginner, it’ll be important to start slow, do your research, and learn the markets.
Top Cannabis Stocks 2018
Now that you are set up with your very own brokerage account, let’s take a look at some of the top cannabis stocks from 2018.
Canopy Growth Corporation (CGC)
As this is written, the CGC stock is trading just under 50 dollars a share. It has nearly doubled in price in just the past three months. In 2014, CGC became the very first cannabis stock to be publicly traded in North America.
From developing a variety of products to market execution, CGC has become one of the largest cannabis brands on the market. In fact, the corporation even caught the attention of Constellation Brands, owner of Molson Coors, which then invested four billion dollars into CGC. The endorsement immediately caused a 30 percent spike in Canopy Growth’s stock prices.
Vitality Biopharma (VBIO)
The VBIO stock is currently trading at just above two dollars per share, making it a great entry point for new investors with lower budgets. While it’s value might be low, it has still grown 25 percent over the last six months. It likely is not a stock that will get you rich quick, but, in a growing industry, it might be a safe bet for the long haul.
Vitality Biopharma deals in cannabinoid-based medications, typically pertaining to neurological and inflammatory conditions. It’s this niche that limits its growth. However, with the U.S. starting to allow CBD-based medications, VBIO could see expansion in the future if they are able to get their products into the U.S. market.
Since its Initial Public Offering (IPO) in July 2018, the TLRY stock has grown over 600 percent, peaking at 856 percent in mid September before coming down slightly. A stock that started out at just about 20 dollars is worth 170 dollars as this is written. TLRY has definitely been one of the most exciting stocks to watch during the second half of 2018.
The producer of a variety of medical cannabis products, Tilray holds one of the hottest cannabis stocks on the market and shows no signs of slowing down. Of course, it is companies like Tilray that make some fear the “cannabis bubble,” but for those early investors, Tilray has been a great addition to their portfolios.
Aurora Cannabis (ACBFF)
Similar to Canopy Growth Corporation, the ACBFF stock is another cannabis company that caught the attention of a major brand. In mid-September, rumors sprouted that Coca-Cola was looking to partner with Aurora Cannabis on a CBD-infused beverage. Since then, the ACBFF stock has grown 45 percent and currently sits at 9.70 dollars.
It is on the cheaper side when it comes to stocks and has potential for major growth if a deal with Coca-Cola is finalized. It could be a good opportunity to get in on the ground floor of an exciting stock option.
GW Pharmaceuticals (GWPH)
Likely the most legitimized cannabis stocks on this list, the GWPH stock is currently worth 165 dollars, with a near-14 percent growth over the last month. What makes GWPH so valuable? They currently produce the only FDA-approved, CBD-based medicine allowed in the U.S., Epidiolex.
When the DEA elected to start allowing various forms of CBD-based products, GW Pharmaceuticals’ stock jumped nearly 10 percent. As the only company with an FDA-approved cannabidiol product, they will dominate the market until someone else steps in. But even then, they should be well-established enough to experience growth for some time.
Key Resources for Investing in Cannabis Stocks
If you’re ready to dive deep into the cannabis investment world, then 420 Investor might be a good tool. Founded by Alan Brochstein, who has experience both in portfolio management and the cannabis industry, 420 Investor is a community for investors to follow the ever-changing industry. Per their description, “The main goal of 420 Investor is to provide real-time, objective information about the top cannabis companies in the market in order to help investors capitalize on cannabis.”
The subscription is 599 dollars a year, likely attractive to seasoned cannabis investors. But, if you have the money, amateur investors too could learn a lot from their newsletters and everything else 420 Investor has to offer.
The Stash Investment App is a great place to start for easy investing. Since Stash groups their investments into “themes,” it’s actually a great place for cannabis-focused investors, as they can group together their cannabis investments. It’s also a great place for beginners as it lets users invest as little as five dollars at a time and follow trends via news stories directly on the app.
MarketWatch is one of the top investment news sources. While they cover the entirety of the stock market, it is also a great platform where you can get your cannabis-specific news. Additionally, it will allow you to look up individual cannabis stocks to track them, see their recent news, and add them to your watch list.
Feature image courtesy of Pixabay user nattanan23