How to Invest in Legal Weed
Over the past few years, legal marijuana – or, sorry, cannabis – has grown into a $ 9.7 billion industry and is expected to reach nearly $ 25 billion by 2021 . Marijuana is currently legal in eight states plus the District of Columbia for recreational use and in 29 states plus the District of Columbia for medical use. The cannabis stock index (yes, it exists) rose 88.8 percent in 2016 and 91.8 percent in 2017.
And to support the cause, to make some money, or both, many of us now want to put our money where our Mary Jane is. Below you will find out what you need to know if you want to add some greenery to your investment portfolio.
How can investing in Weed be legal?
For many American investors, their dollars are effectively shipped north of the border, where marijuana will become fully legal by July . “There are several licensed manufacturers in Canada that trade on the Toronto Stock Exchange (TSE),” said Alan J. Brochstein, a certified financial analyst and founder of 420 Investor and New Cannabis Ventures . “This is a sign of the maturation of the industry.”
In the US, most of the companies that you can invest in are “subsidiary”, meaning they do not relate to the plant. One example? Kush Bottles , making packaging. “They don’t have to grow weed or deal with massive overhead costs or federal repression,” explained Jason Spatafora of MarijuanaStocks.com . “They just need to make bags.” Other ancillary companies manufacture evaporators, irrigation lines, or software; even the Scotts Miracle Gro, according to Spatafor, “is currently marijuana.”
Biotechnology is another major industry, with companies such as GW Pharmaceuticals, Cara Therapeutics, AbbVie, Zynerba, and Insys Therapeutics using endocannabinoids to treat conditions such as epilepsy and cancer pain. While these are some of the most promising companies for investors, just know what exactly you are supporting. Insys, for example, lobbies against the legalization of marijuana, which may conflict with your beliefs and investment strategy, and Canadian company Emblem demonstrates that its president was responsible for launching Oxycontin.
What you need to know about pots
If you are looking to invest in Canadian or American cannabis companies, you have two options: penny stocks on OTC exchanges or common stocks on major exchanges like TSE, NASDAQ, and NYSE. Both types can be purchased through online brokers such as Fidelity and Ameritrade.
Penny stocks can be cheap, but they are also dangerous. “These stocks are very volatile and sometimes few people invest in them, so liquidity – a large number of buyers and sellers – can cause wild price swings,” explained Debra Borchardt, CEO and editor-in-chief. green market report .
When Spatafora, known as “The Wolf of Weed Street” due to his attachment to small stocks, first started investing in 2013, he experienced it firsthand. “I’ve never bought a penny stock before,” he said. “I bought 10,000 shares for $ 500. Two days later, the stock was up 50 percent; two days after that, the shares collapsed. “
Volatility aside, you should note that penny stocks do not face the same reporting requirements as traditional stocks. Unknowing investors can fall prey to pump and dump schemes , so you need to do your research. Read what the experts have to say about the company, Twitter for “$” and the ticker, track earnings, and make sure the founders are never accused of fraud.
Is there a Weed mutual fund?
No, but there are two Exchange Traded Funds (ETFs): the Horizons Marijuana Life Sciences ETF (HMMJ) and the Alternative Harvest ETF (MJX). Of the two, both Borchardt and Brochstein recommended the first.
HMMJ shares, traded on TSE, are owned by more than 25 companies and have grown by 121% since their inception in April 2017. At the same time, the overwhelming majority of it is influenced by Canadian companies, which, according to Brochstein from New Cannabis Ventures, is “very narrow.” Universe. “
“I think it only makes sense for people who are uncomfortable picking a few stocks from this group, or who have limited funds and cannot diversify due to commission costs,” he said. “There are no ETF options for those looking to enter the US market.”
Alternative ways of investing
While stocks are the easiest way to invest in the marijuana industry, accredited investors – those with over $ 1 million in assets (excluding home) or earning over $ 200,000 a year – can also directly support private companies.
One way to reach entrepreneurs is through the Arcview Group , a cannabis investment network that vets and oversees the companies it represents every week to over 600 member investors. Success stories include Arcview Mirth Provisions , which creates drinks with the addition of cannabis and Eaze , platform delivery of marijuana.
“Never before have we seen a multi-billion dollar industry with a 30 percent CAGR where federal law forces the big boys to sit on the sidelines,” said William Petrusky, Arcview’s vice president of sales. “The opportunity for private investors to participate and see profits is not much different from the idea of joining the IT investment network 30 years ago.”
Wait … but isn’t this the worst time to jump?
On January 4, Attorney General Jeff Sessions overturned Obama ‘s memorandum that allowed states to largely determine their own marijuana prosecution policies. While no one knows what will happen next, experts say that doesn’t mean this is a bad time to invest. (Remember, the most legitimate investment opportunities right now are in Canada anyway.)
While Brochstein said he has become more cautious with his investments and advised his followers to limit their presence, others think otherwise. “I think now is a good time to invest because stock prices have plummeted,” said Borchardt of Green Market Report. “The states are resisting, and I believe that stock prices will resume gains as other people calm down by the level of risk they are taking. The best investors buy when others are scared. “
And Arcview’s Petrusky, who believes legalization will happen “sooner than we think,” called it “one of those scenarios that give a nervous investor a reason to stay out.” “For those who are brave and understand that we are on a path that is almost impossible to change, this is an opportunity for an investor,” he said. “You will never see better deals than today.”
What to do before investing in cannabis
Cannabis is undoubtedly a great investment opportunity. But as with anything else, you must do your research first. Make sure you thoroughly screen all potential companies and keep an eye on what happens with the legislation. Start with “paper trading” – write down what and when you would buy and sell, and see how you do it.
“The amount of information is enormous, as is the amount of disinformation,” Petrusky said. “In any investment strategy, the main thing is information. And in this area more than in any other. “
Regardless of when and how you decide to dive into this booming industry, just remember Brochstein’s pertinent advice: “Treat investing in cannabis like a food: start small and take your time.”