As global culture becomes more and more marijuana friendly, it’s looking like big business for the smart investor.
When discussing a global market of any commodity, it’s important to not just focus on the products themselves, but all of the different facets of business that dovetail into the on-trend industry. Marijuana markets are no different. While there is definitely money to be made in the direct trade, or production, of marijuana in and of itself, a smart investor will expand their scope and think bigger.
Market projections for the US legal markets alone are projected to hit $25 billion by 2025, and that’s without the market expanding should more states start legalizing the product. This impressive figure, however, is pretty erroneous. Only because it fails to take into consideration any markets that are outside of the 29 states of the US that have already legalized marijuana for medical or recreational use. The figure also represents other “accessory” markets: merchandising, food & beverage markets, health and beauty, as well as cultivation and production supplies such as marijuana seeds and tools and heavy machinery needed to produce crops on an industrial scale. This number also fails to bring in the revenue expected from global markets, as Canada begins to step onto the playing field of legal bud. Uruguay has been there for years, along with special sectors in a number of other countries.
Estimating a Global Industry
Even though this number seems woefully cautionary when viewing the market against the US alone, some high profile businessmen in the world of cannabis have come up with a different figure all together in estimating a worldwide revenue, which has many analysts scratching their heads. Tilray CEO has stated that the global market is a $150 billion industry, while competitor Canopy Growth suggests that it could top $500 billion. It should come as no surprise, after hearing these astronomical projections, that both Tilray and Canopy hold vested interest in getting people excited about the possibilities of cannabis.
However, these particular numbers seem to be, idealistic and best, if not blithe oversight at their worst. Canopy Growth’s shock-inducing $500 billion projection rests solely on the believe that recreational and medical cannabis use will be legalized worldwide in the coming years. Bruce Linton, co-CEO of Canopy and the man who gave us this figure, also seems the think that cannabis is poised to disrupt some of the biggest consumer markets in the world, including pharmaceuticals, alcohol and tobacco. Which would see the market becoming infused with cannabis containing beverages, marijuana used as a cessation tool for tobacco users, and the pharmaceutical companies the use of cannabinoids in a much wider range of treatment indications.
Outside of these wild and incredibly liberal projections, Arcview Market Research and BDS Analytics came up with a much more conservative, and realistic, $32 billion global market by 2022.
Stocks to Watch
These numbers, even at a cautious and conservative level, are still fairly enticing to any investor looking to get in on the ground floor of the global cannabis market, but analysts suggest that investors focus on “more realistic near-term projections” than the far and away potential market estimates. Accessory markets that may circumvent pre-established anti-marijuana laws include the booming CBD market, as well as hemp product operations. There are many biotechs that are looking to expand knowledge and create daily products that are meant to enhance our everyday lives without making us high, which is another sector to keep a close eye on.
According to an article released by Investopedia, they suggest that the type of stock is important when considering an investment in the marijuana industry. They gave a list of their favorite types of stacks to watch for, which include the
- Plant Touching/Cultivation Operations
- Ancillary Business
- Marijuana Business Related Services
- Sin Stocks Aligning with Cannabis Business
Plant Touching business focus on production of solely medical marijuana, cultivation are stocks that focus on growing operations that supply both legal and/or recreational production sectors. Some stocks and their respective market caps to keep an eye out for in these areas are: Canopy Growth Corp. (CGP) $13.1B, Aurora Cannabis Inc. (ACB) $6.37B, Cronos Group Inc. (CRON) $2.44B.
Pharma and Biotech companies are always some investor favorites when it comes to investing in projected markets. That’s because, if chosen correctly, these stocks have a high likelihood of decent turnover. With businesses like medical marijuana and CBD/Marijuana therapeutic treatments on the rise, this is a cleverly increasing market. Stocks, and their market caps that are making some big moves in the cannabis market are: AbbVie (ABBV) $132.9B, GW Pharmaceuticals (GWPH) $4.06B, and Cara Therapeutics (CARA) $624.4M
Ancillary business in the marijuana market consists of all of the side projects that make marijuana business grow- such as hydroponic setups and suppliers, personal use solutions and supplies, even packaging and large scale agricultural solutions that are aimed at revolutionizing the way the world creates its pot. Stocks to watch are: The Scotts Miracle-Gro Company (SMG) $3.76B, KushCo Holdings (OTC:KSHB) $569.4M, and GrowGeneration Corp (OTC:GRWG) $74.6M.
Because of laws, specifically federal law in the US, that restrict what marijuana retailers and producers can do with their funds, or where property proprietors may hesitate to rent or lease area designed for use in the cannabis market, Marijuana-business related services are a relatively new area. Don’t be intimidated by their novelty however, because their services are paramount to ensure that marijuana business actually happens in real time. Stocks to watch: General Cannabis Corp (OTC:CANN), $83.3M, Innovative Industrial Properties (IIPR) $506.2M, and mCig Inc. (OTC:MCIG) $102.62M.
Sin stocks, while generally difficult to buy into, are the type of stocks that flourish even in a down market. Sin stocks like alcohol and tobacco should be a bit worried that marijuana business could cut into their profits. Because of this genuine concern, certain sin stock companies are hoping to join forces with the marijuana business to create new products for the market and a consumer drive for products that utilize both marijuana and good old fashioned alcohol or tobacco. Stocks to watch: Constellation Brands (STZ) $30.2B, Heineken N.V. (OTC:HEINY) $50.6B, Molson Coors Brewing Company (TAP) $13.7B