On October 17, 2018, Canada will make history when it becomes the first industrial country to legalize the recreational use of marijuana. Because the untapped recreational pot industry is projected to be worth billions and industry growth is expected to trounce the broader markets, investors have been looking for the best marijuana stocks to invest in. Unfortunately, investors, afraid to miss out on the next big thing have been sending marijuana stocks higher and higher, with nosebleed valuations. This has made it very difficult to find undervalued cannabis stocks. That doesn’t mean they aren’t out there, you just have to know what to look for.
The Marijuana Industry
Medicinal marijuana has been legal in Canada since 2001, this allowed many of the now big players in the pot industry to establish massive growing operations, develop profitable sales channels, and announce new partnerships. In the United States, medical marijuana is legal in 30 states and recreational pot is legal in nine states (Alaska, California, Colorado, Maine, Massachusetts, Nevada, Oregon, Vermont, and Washington). That said, you can still be charged criminally with smoking pot in the U.S., making it more than a little confusing. Needless to say, other countries will be watching to see how the legalization of marijuana in Canada goes before wading into the issue. Countries like Australia and Germany appear as though they are about to follow Canada’s lead. The broad-based acceptance of adult-use marijuana is helping fuel the optimism for the burgeoning cannabis industry.
Legal Marijuana Industry to Be Worth $146 Billion by 2025
The marijuana industry is going to be huge. By 2025, the recreational marijuana market is expected to be worth $146.4 billion with a compound annual growth rate (CAGR) of 34.6%. Over the next 13 years, the legal pot industry is projected to grow at a CAGR of 19.75%. Keep in mind, the legal cannabis market is still in its infancy. In fact, the fourth quarter of 2018 will be the first reporting period that includes revenue from recreational pot. Most of the biggest players in the legal weed market have not really reported big sales or profits yet. But all that will change. Sadly, investor euphoria for cannabis stocks has sent share prices soaring, with many already saying pot stocks are in a bubble. Speculation will most likely send weed stocks considerably higher over the coming months. That has made it difficult to properly value cannabis stocks. While a rising tide lifts all boats, there are a number of great marijuana stocks that continue to trade under the radar of Bay Street and Wall Street. Again, the key is to know what to look for and how to separate the weed from the chaff.
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The marijuana sector is already blistering, and once it becomes legal, more and more investors will pour into the market. With valuations already sky high, investors should expect to see the share prices of marijuana stocks experience major swings. That doesn’t mean investors should stay away from marijuana stocks; it’s a multibillion-dollar industry and cannabis is here to stay. The key is knowing what to look for. The trading experts at
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