The cannabis industry continues to get bigger and in there’s still plenty of money to be made by small investors.
And there’s more than one way to profit in the Marijuana sector.
Think about the well-established metals sector. Some investors put metal in a vault, while some like to invest in miners, and even others like to spread out exposure by using an ETF.
Despite being a newer industry, there are still many different types of way to invest in the booming sector.
In my experience researching and following this industry I’ve found that there are five main types of pot stocks that you’ll encounter. And some aren’t even that obviously tied to cannabis. Yet, all stand to profit in different ways.
#1 – Cannabis Growers and Retailers
The most obvious cannabis companies are growers and retailers.With growing legalization, pot shops are popping up on every corner. With that comes the demand for growing, preparing, packaging, and transporting all sorts of cannabis products.
Many companies want to control as much of that pipeline as possible as not to lose any profit along the way. And from what I’ve seen many participate in both the medical and recreational market when they can.
Remember whether it’s medical or recreational, cannabis products need to be labeled and handled properly. Which means there is plenty of money to be made through this pipeline. It also means that due to regulation and licensing, there is a barrier to entry. So, look for the companies that have the licenses and the means to keep expanding.
#2 – Pot-Adjacent
Some of these companies are even starting to become household names such as Trulievewhich dominates 50% of sales in Florida. Or Curaleaf which has dispensaries across 23 different states.
There’s also money to be made in “pot- adjacent” companies. You’ll also see these called ancillary cannabis companies. These include companies that provide goods or services to cannabis companies or otherwise profit from the growing industry.
One you’ll see mentioned frequently is Innovative Industrial Properties. Since marijuana is still illegal at the federal level, cannabis companies can’t easily secure capital from banks. IIPR is in the business of being a cannabis landlord. It will buy properties from US cannabis operators and then lease the properties back to them.
Or how about GrowGenerationwhich is a hydroponic company catering towards cannabis growers. Even household name Scotts Miracle-Gro ranks as a leading supplier of hydroponics gardening products to the cannabis industry. This might be a great play for you if you’re looking to benefit from cannabis, but don’t want a pure cannabis player.
#3 & #4 - Hemp-Based CBD and Medicinal Cannabinoid-Based Companies
There are even two types of cannabis stocks that don’t even depend on legalization.
I’m talking about hemp-based CBD companiesand medicinal cannabinoid-based companies.
Hemp-based products are legal on the federal level. These can be found at most pharmacies, grocery stores, even farmer’s markets and gas stations, which means that those companies in this industry have huge potential for sales.
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It has been known for years that cannabinoids have medicinal benefits. Companies from small biotech startups to pharmaceutical giants have been working hard to profit from these compounds.
In 2018, GW Pharmaceuticalsmade history when Epidiolex became the first drug made from a cannabis plant to be approved by the FDA. At the time Epidiolex was only approved for rare forms of childhood epilepsy, but the company has continued to expand on its uses over time.
#5 - Cannabis-Based ETFs
Last but certainly not least you could look towards cannabis-based ETFs.
The first cannabis-focused ETF appeared on the market in 2018. And since then, many other cannabis related ETFs have appeared on the scene.
Some focus on specific regions, while some spread out over international stocks. Some focus on biotech and some on a mix. There are a lot of choices here to add exposure to your portfolio without picking individual stocks.
It’s important to understand what you’re investing in. This is especially important in cannabis as some companies are more exposed to the laws and regulations than others.
There’s a lot of opportunity, but it always comes down to doing the research and having the inside scoop so you can be holding the right stocks at the right time.
That’s why I’m going to continue unpacking the nuances of investing in pot stock and I’ll be giving more information on my #1 pot stock play right now.
To your prosperity and health,
Joshua M. Belanger