Are Cannabis Stocks a Good Investment Right Now?


Dec. 16 2020, Published 11:42 a.m. ET

Businesses in the cannabis industry are growing, consolidating, and making plans for the future. As a result, the sector's capitalization is making an impact on the market at large.

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Recently, corporate leaders formed two new cannabis companies — Tilray and Jay-Z's The Parent Company (TPCO). Investors in the general public may want to consider diversifying their portfolios with cannabis companies if they want to keep up.

Stocktwits shows that cannabis is trending

Since the merger between Aphria and Tilray on Dec. 15, the cannabis industry has officially developed a new giant. The news just days after TPCO formed a towering umbrella for cannabis companies like Caliva and Left Coast Ventures.

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On Stocktwits, a market-geared social feed with its own trading app (aptly titled "Trade App"), the cannabis hashtag is trending.  

Some investors are counting on penny stocks, which aren't hard to come by in the industry. Aurora Cannabis has been trying to claw its way out of a bear run for quite some time now. One thing is certain, though. There's a lot of room for growth in the cannabis industry. 

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Users are making sure to include CBD in the conversion. CBD, which is a non-psychoactive cannabis treatment, is huge in the health industry. According to Grand View Research, the naturopathic medicine industry is expected to grow at a compound annual rate of 19.93 percent from now until 2027. Investors may not want to wait until the industry hits $300 billion before they hop on board. 

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A forecast for cannabis stock

During the 2020 election, four new states passed cannabis legalization bills — New Jersey, Arizona, South Dakota, and Montana. The new states bumped the total number of legal states for recreational cannabis up to 15. Now, a third of Americans live where they can access cannabis without needing a medical card.

As a result, it makes sense for individuals to invest in the cannabis industry since it's becoming increasingly relevant. If dispensaries and other cannabis-related operations could have an easier time borrowing and handling money through banks instead of in cash, the industry would skyrocket.

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In the 2020 Marijuana Business Factbook from Marijuana Business Daily, experts said that we may be able to look forward to $37 billion in total legal sales by 2024. Analysts expect Curaleaf Holdings, Cresco Labs, Green Thumb Industries, and Trulieve Cannabis to take the reins.

How to invest in cannabis

Now that Tilray has a hold of Aphria, "TLRY" on the Nasdaq may be a solid buy. From a six-month perspective, the stock is rising, but there's tons of room for long-term growth.  

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The SPAC for TPCO is expected sometime in January 2021. For someone seeking an IPO-style investment, this may be the one.

Cresco Labs (CRLBF) and Curaleaf Holdings (CURLF) both trade on the OTC markets. The trading volumes are lower on this exchange, but you may be able to take advantage of these companies' projected growth through the platform.

If you are looking for something more diversified and tax-friendly, consider an ETF. One marijuana ETF with an impressive performance is the AdvisorShares Pure Cannabis ETF, which goes by the ticker symbol "YOLO" on the NYSE ARCA. A solid 4.24 percent annual dividend yield plus a one-year performance of 44.5 percent make YOLO a solid contender. The expense ratio is a bit high at 0.74 percent, but that's average for cannabis ETFs.


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