No other industry has captured Bay Street and Wall Street like the cannabis industry. Canada legalized adult-use recreational cannabis in October, and it finally opened the floodgate on cannabis and cannabis-related stocks. Yes, medical marijuana has been legal in Canada since 2001, but the revenues from that were limited. Sales from recreational cannabis use are significantly higher. And, with other countries in the western world looking at legalizing recreational marijuana, sales will surge even higher. Despite huge sales and an amazing outlook, many analysts and investors still think investing in cannabis is not worth the risk. That fear may be misguided.
Don’t Bet Against the Cannabis Industry
It’s been a great year for cannabis bulls. Things didn’t start out that way. Recreational cannabis use was legalized in Canada in October, the same time that the broader markets experienced a sell-off. The swoon lasted for the entire fourth quarter of 2018. This led many analysts to say that the so-called cannabis bubble had burst and that the industry was too risky.
Had you listened to the talking heads you would have missed out on one of the most exciting industry’s out there right now. Case in point, over the first two and a half months of 2019, the Horizons Marijuana Life Sciences Index ETF (NYSE:HMMJ)—the world’s first weed ETF—has advanced 56% and the Marijuana Index is up 31%.1,2
Over the same time frame, the S&P 500 is up a respectable 13.8%.
There is reason for the ongoing optimism. First, cannabis stocks are starting to report their first full quarters to include sales from recreational marijuana. Revenues are soaring in the triple digits and the 2019 outlook remains robust for both well-known marijuana stocks and lesser known players.
The outlook beyond 2019 is also exciting for the entire cannabis industry. One recent study believes the worldwide cannabis market could reach $57 billion by 2027. One of the largest markets of course, will be North America, where sales are expected to top $47.0 billion, capturing 83% of the global market, within 10 years.3
In the U.S alone, the cannabis market could hit $16 billion by 2025. Those projections don’t factor in revenues that could come should the entire country legalize recreational marijuana use. Right now, 10 states have legalized recreational pot use, much to the chagrin of the Federal government. And more states will be holding referendums in the lead up to the 2020 U.S. election.
While the cannabis industry is far away from maturing, even conservative investors are getting on board. Canadian pension funds, which are not known for going out on a limb when it comes to investing, are pouring into the cannabis industry.
In the fourth quarter of 2018, the Public Sector Pension Investment Board bought shares in four different cannabis companies, valued at approximately $77 million. Meanwhile, the Ontario Teachers’ Pension Plan Board snapped up $1-million in shares of Aurora Cannabis Inc. (TSX:ACB)(NYSE:TCB).4
Admittedly, those numbers are small, especially when you consider Canadian pension funds are worth hundreds of billions of dollars. But it does go to show that even in the early stages of legalized pot, investing in recreational cannabis has quickly become more mainstream.
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The cannabis industry is in its infancy and publicly traded Canadian pot stocks are leading the way. While some pundits believe investing in cannabis stocks is too risky, the fact is, investing in any industry or sector can be. But it doesn’t need to be. Investing in any industry or sector can be risky. But it doesn’t need to be. The trading experts at Learn-To-Trade.com
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- “Horizons Marijuana Life Sciences Index ETF,” Horizons Exchange Traded Funds, last accessed March 13, 2019; https://www.horizonsetfs.com/etf/hmmj?gclid=CjwKCAjw1KLkBRBZEiwARzyE79Ml1ATO96t974TCfWliTHr7syhjhjt_WFchbuR0wYTJWVLHXjjUCRoCbOYQAvD_BwE&gclsrc=aw.ds
- “North American Marijuana Index,” The Marijuana Index, last accessed March 13, 2019; http://marijuanaindex.com/
- “Multiple Analysts Project Incredible Growth for Cannabis Investors,” marijuanastox.com, March 12, 2019; https://www.accesswire.com/538731/Multiple-Analysts-Project-Incredible-Growth-for-Cannabis-Investors
- “Canadian Pension Funds Buy Cannabis Stocks,” The Globe and Mail, February 25, 2019; https://www.theglobeandmail.com/business/article-canadian-pension-funds-buy-cannabis-stocks/
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