What Are Cannabis Stocks?
Cannabis stocks are stocks that represent companies that are active in the cannabis (marijuana) industry. The cannabis sector is an emerging one. With fast moving changes in regulatory conditions around the world and emerging opportunities, the industry is driving impressive investor interest.
What Should You Look For In Cannabis Stocks?
- Product – First and foremost, it’s important that any cannabis stock that you invest in has a real product. There are several companies out there that are issuing press rleeases stating that they are getting in the industry through the acquisition of some research firm. These “cannabis companies” are just riding the wave, hoping to take advantage of the heavy investor interest. It’s best to do your research to ensure that the product being offered is not only developed, but offered in a legal market in the United States, Canada and/or around the world.
- Footprint In Canada – Canada recently made recreational adult-use cannabis legal. As a result, there is a large opportunity to quickly take a cornerstone position in that industry. Some of the strongest companies in cannabis have a strong presence in the Canadian market.
- Footprint In The United States – The United States is seeing an evolution in regulation, opening the door for cannabis companies to make a name for themselves. Recently, the United States passed the 2018 Farm Bill, legalizing the growth, use, and sale of hemp and its derivatives. This has opened the door to an emerging CBD market in the US. It is also speculated that the United States will soon legalize adult-use cannabis. An early start in the CBD space in the United States could open the door to strong opportunities ahead.
- Balance Sheet – No matter if you’re looking at a cannabis stock or a stock in any other industry, it’s important to take a look at the company’s balance sheet. After all, companies with strong financial foundations have something to build from. In the Cannabis space, there’s quite a bit of spending on infrastructure taking place at the moment. So, it’s important to take a look at spending and make sure that the company represented by the cannabis stock that you’re interested in can afford to continue for the long run.
- Analyst Opinion – As always, it’s a good idea to use analyst opinions to validate your own research. Although it’s never good to blindly follow the opinion of anyone, analyst live, eat and breathe the market. So, checking out their ratings on a stock that you’re interested in will likely prove beneficial.
Common Terms Used In The Cannabis Space
There are several terms that are specific to the cannabis space that you should know before making an investment decision in the space. These terms include:
- 2018 Farm Bill – The 2018 Farm Bill is a bill that was passed in the United States in late 2018. This bill legalized the cultivation, manufacture and sale of hemp and its derivatives, giving way to the CBD market in the region.
- CBD – CBD, also known as cannabidiol, is an extract that can be taken from the hemp or the cannabis plant. CBD is known to have healing and relaxing properties.
- THC – THC, or tetrahydrocannabinol is the psychoactive chemical found in cannabis plants.