Not all cannabis companies are the same, as I previously discussed.
But not all cannabis is the same either.
And that could mean profits this year or only the potential for profits years from now.
So far this week, I’ve outlined how big of an opportunity we are looking at with the legalization of cannabis. I’ve also given you the five major categories of companies set to profit from that legalization.
But there’s another element to this major emerging profit story worth looking at: types of cannabis.
There are different kinds of cannabis plants. But without getting into the many various strains, there are two important ones for our trading purposes: marijuana plants and industrial hemp.
When most people think about cannabis, its related companies and the potential for explosive growth if legalized, they are probably picturing pot plants.
But today, I want to dig a bit into what the other type means for you.
Remarkably, the 2018 Farm Bill passed through Congress and was signed by President Trump without much fanfare. But maybe it should have.
You see, it included a provision that legalized the growing and cultivation of industrial hemp. In other words, it allows farmers to produce and sell the type of cannabis plants that produce low levels of tetrahydrocannabinol, or THC. But those are also the ones used to produce cannabinoids, or CBD.
For many years, as hinted yesterday, we’ve known of the medicinal effects CBD oils and compounds can have. In 2018, GW Pharmaceuticals plc (NASDAQ: GWPH) was even issued the first-ever CBD-based drug approval from the FDA for its Epidiolex epileptic seizure reduction treatment.
But as you can see, that opportunity might have already passed us all by.
Researchers have found many other uses for the compound throughout the years. But with the opening up of U.S. federal laws for CBD – something still not done for its THC counterpart – studies are progressing faster.
Of course, since the compound itself is no longer illegal, it doesn’t necessarily need wait on the FDA to continue approving new drugs.
The Farm Bill allows for the processing and sale of CBD oils. You can go out and buy CBD oil right now, in fact.
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In 2019, the FDA did get together researchers and industry professionals to discuss limits on certain other products using CBD. But as of yet, very little has come out of that discussion.
That means in many places you can buy products like CBD-infused topical creams, CBD-gummies, CBD-infused beverages and more.
This is where the opportunity comes in.
With or without the FDA, Congress or election ballot, there’s a cannabis market already here. And it is growing just as fast – if not with the same overall size – as the marijuana industry as a whole.
Just since the passage of the Farm Bill at the end of 2018, CBD product sales doubled to about $2 billion.
That’s still just a drop in the bucket.
Forbes suggests that by 2024, it could be a $20 billion market.
Remember, that’s without any action needed on the marijuana front. No de-scheduling THC, no legalization nationwide and most importantly, no legislation at all.
But what will really open up this niche corner of the cannabis market is for major retailers to jump on board.
And that has already started to happen.
Walmart, for instance, already sells hemp seed oils in its stores. This is different from the $20 billion market we’re talking about. But it is related. These oils come from the seeds of the plants rather than the leaves, stalks and flowers.
But it is something that could only have happened in the last few years. And it’s not the only thing that could be coming to Walmart’s shelves.
In 2019, NewAge Inc. (NASDAQ: NBEV) caught that whale.
Walmart agreed to begin stocking shelves with NewAge’s Marley-branded CBD-infused teas.
This is just the start. And NewAge is definitely not the only player in this important turning of events.
I’m looking at Charlotte’s Web Holdings Inc. (OTC: CWBHF). It already has the largest and best-selling brands in the U.S. through other retailers and online. Its products include oils, creams and gummies.
Once these hit the major retailers, that’ll be a huge impact.
And you can bet that a company like Walmart won’t want to miss out on a $20 billion market like this.
So, if you still aren’t sold on the whole marijuana legalization argument yet, that doesn’t mean there’s no money to be made right away.
Even if Congress does what Congress often does and kick the can on pot down the road, the door for CBD is already opening right now.
As I've shown you, there's still a lot of uncertainty, which is why there's still massive opportunity for the little guy.
CBD is the more conservative approach of the cannabis boom and why a company such as Charlotte’s Web is already best positioned as it continues to gain more big box shelf space.
Now, if you’re wondering How to Get Started with Pot Stocks, then you’ll don’t want to miss tomorrow’s article.
To your prosperity and health,
Joshua M. Belanger