October 22, 2019
Marijuana Stocks – All you need to know
First, let’s talk about how you actually buy marijuana stocks, or any stocks for that matter. The first thing you need to do is open a brokerage account. Here are the brokerage firms we recommend:
- Open a TD Ameritrade account – One of the easiest brokerage firms to use out there is TD Ameritrade and they charge no trading commissions. Ever. Trades are always free, and you can buy stocks on the over-the-counter (OTC) market in addition to stocks on major U.S. exchanges. Great for beginners.
- Open a Zacks Trade account – One of the best brokers out there to trade international stocks is Zacks Trade. It’s also more geared towards experienced traders who want access to over 90 foreign exchanges. You can open an account with just a $2500 dollar deposit and trades are about $3 a pop – unless you trade penny stocks in which case just light your money on fire instead. You will be able to buy stocks that trade on Canadian exchanges which a lot of marijuana stocks do.
After you’ve opened one of these brokerage accounts, we need to move on to stock selection.
Which Stocks Should I Buy?
Now that you’ve opened a brokerage account, your next question should be “which marijuana stocks do I buy”? We’re not going to tell you the answer because we don’t know. As we type this, we own zero shares in any marijuana stock.
We’ve done quite a bit of research around this topic now and our takeaway is that while the majority of over-the-counter (OTC) stocks about as desirable as a big bag of seedy Mexican brick weed, the big Canadian weed growers are where the investment opportunity lies for now.
Which Cannabis Stocks are Good?
Since we’re not going to tell you what stocks to invest in, you’re going to have to do some digging of your own. You don’t need to have a degree in finance, just some common sense. When you go to your dealer to pick up an eight of skunk, you never front him the money. You have him procure the sack first. You smell it, squeeze it, feel it, and eyeball it to make sure it’s an eighth. If he brings you Mexican brick weed, if the sack looks light, if the buds don’t look right, you don’t buy it.
That’s kind of how we go about evaluating stocks. We don’t just buy stocks and ask questions later. We first have a good look around. For every stock you are researching, don’t even bother going to their website. Instead, go right to their regulatory filings located online. For U.S. stocks, go to the SEC Online Filing website. For Canadian stocks, go to SEDAR. Open up the most recent quarterly earnings report.
#1 – Canopy Growth (NYSE:CGC)
MarketBeat Followers: 7,319
Market Cap: $7.27 billion
Consensus Rating: Hold
Rating Score: 2.4
Ratings Breakdown: 9 Buy Ratings, 7 Hold Ratings, 2 Sell Ratings.
Consensus Price Target: $49.63 (134.7% Upside)
Canopy Growth Corporation, together with its subsidiaries, engages in growing, possession, and sale of medical cannabis in Canada. Its products include dried flowers, oils and concentrates, softgel capsules, and hemps. The company offers its products under the Tweed, Black Label, Spectrum Cannabis, DNA Genetics, Leafs By Snoop, CraftGrow, and Foria brand names. It also offers its products through Tweed Main Street, a single online platform that enables registered patients to purchase medicinal cannabis from various producers across various brands. Canopy Growth Corporation has a clinical research partnership with NEEKA Health Canada to investigate the efficacy of cannabinoids for the treatment of post-concussion neurological diseases in former NHL players; and partnership with Parent Action on Drugs. The company was formerly known as Tweed Marijuana Inc. and changed its name to Canopy Growth Corporation in September 2015. Canopy Growth Corporation is headquartered in Smiths Falls, Canada.
#2 – Terra Tech (OTCMKTS:TRTC)
MarketBeat Followers: 1,339
Market Cap: $32.26 million
Consensus Rating: N/A
Rating Score: NaN
Ratings Breakdown: 0 Buy Ratings, 0 Hold Ratings, 0 Sell Ratings.
Consensus Price Target: N/A
Terra Tech Corp. operates as a vertically integrated cannabis-focused agriculture company. The company operates in three segments: Herbs and Produce Products; Cannabis Dispensary, Cultivation and Production; and Real Estate and Construction. The Herbs and Produce Products segment offers hydroponic herbs and leafy greens products. The Cannabis Dispensary, Cultivation and Production segment operates medical marijuana retail and adult use dispensaries under the Blüm brand, which provides a selection of medical and adult use cannabis products, such as flowers, concentrates, and edibles; and produces and sells a line of medical and adult use cannabis flowers under the IVXX brand name, as well as a line of medical and adult use cannabis-extracted products comprising concentrates, cartridges, vape pens, and wax products in California and Nevada. Terra Tech Corp. was founded in 2010 and is headquartered in Irvine, California.
#3 – 22nd Century Group (NYSEAMERICAN:XXII)
MarketBeat Followers: 1,031
Market Cap: $256.36 million
Consensus Rating: Buy
Rating Score: 3.0
Ratings Breakdown: 1 Buy Ratings, 0 Hold Ratings, 0 Sell Ratings.
Consensus Price Target: $12.00 (453.0% Upside)
22nd Century Group, Inc., a plant biotechnology company, provides technology that allows increasing or decreasing the level of nicotine and other nicotinic alkaloids in tobacco plants, and cannabinoids in hemp/cannabis plants through genetic engineering and plant breeding. It offers premium cigarettes under the RED SUN and MAGIC brands; and SPECTRUM research cigarettes for use in independent clinical studies. The company’s products under development include BRAND A, a very low nicotine content cigarette; X-22, a tobacco-based botanical medical product for use as an aid to smoking cessation; and BRAND B, a low-tar-to-nicotine ratio cigarette. It is also involved in contract manufacturing business for third-party branded tobacco products. The company has a strategic research and development agreement with Keygene N.V. to develop hemp/cannabis plants for medical and therapeutic use, and other applications. 22nd Century Group, Inc. was founded in 1998 and is headquartered in Williamsville, New York.
Do you need to invest in Cannabis Stocks?
If you can afford to buy an eighth of chronic every week at $50 bones a sack, you can afford to put $50 into your Betterment account. Only after you’ve made that commitment to your future should you open up a brokerage account and invest in marijuana stocks. You’ll thank us for it.
5 Reasons for Investing in Marijuana stocks
1. Hemp is going to be big
A further clarification rounds out the picture. The cannabis family is classified into either Indica or Sativa. The marijuana plant is a member of both but hemp is Sativa-only.
Although it had previous been technically legal to cultivate hemp in the US providing the THC content did not exceed 0.3%, in effect the US 1937 Marijuana Tax Act made it illegal to possess all forms of cannabis thereby hindering cultivation.
Hemp had been cultivated in the US since the seventeenth century as a mainstay of the colonial economy to make ropes, textiles, sacks, canvas and paper.
With the passing of the US Farm Bill in 2018, hemp has again been legalised following its removal from the schedule 1 controlled substances categorisation. Production is expected to take-off rapidly.
However, bear in mind that the US Food and Drug Administration has ruled that hemp products are not allowed to be used for dietary purposes and CBD-infused food and beverages is not legal until later this year.
The CBD hemp market in the US is set to grow to $1.3 billion by 2022 for a five-year compound annual growth rate (CAGR) of 27.2%, according to the Hemp Business Journal. That’s a 300% increase. It could expand even faster than that if established farmers turn to the crop.
Investors should also be aware that the research has only got started in earnest on CBD and THC, and it is pretty much non-existent when it comes to the bulk of the cannabinoids isolated to date. There could be many more yet to be isolated.
2. Legalization of marijuana
Cannabis legalization for medical use is spreading and with it the opportunity for cannabis companies.
Recreational use will be slower to be legalized but all the signs point to change as younger generations grow older and more hostile older generations pass away.
The decline in beer drinking in the west among millennials is just one sign of what the future may hold for cannabis.
The addressable market (which we discuss further below) could be as large as $500 billion if the disruption of the medical, food and beverage industries comes off.
3. Wellness, beauty and edibles
Two key growth areas will be in wellness and edibles. CBD is the key active ingredient for all those product types. CBD oils are selling like hot cakes for ailments such as anxiety.
It is also finding its way into topical products for skin health and beauty.
For example, MGC Derma cream is a hit at the luxury outlet Harvey Nichols. The cream is made by Australian medical research company MGC Pharmaceuticals.
4. Stock prices attractive in small caps and acquisition targets
Admittedly there are some pretty meaty valuations among the top flight cannabis stocks but under the radar there are great risk/reward opportunities among their small-cap peers. Some of the candidates that fit the bill are The Green Organic Dutchman, OrganiGram and Innovative Industrial Properties and are all mentioned in more detail below.
And of course there are cannabis firms that could come to the attention of a deep-pocked suitor eager to get into the space. HEXO is often talked about as a target and is currently in a partnership with brewer Molson Coors.
With the sharp sell-off at the end of October last year, now could be a good time to enter the market before it gets too frothy again.
5. Medical uses – just scratching the surface
The medical marijuana industry’s full potential is very far from being visualised let alone realised.
Put that another way, research has only just started in earnest and with 113 cannabinoids that have been isolated so far, and no doubt many more compounds to be discovered, the possible use cases could mushroom.
In something of an endorsement of the validity of certain cannabis-based treatments as effective, or at least not harmful, last year Sun Life Financial began offering medical marijuana coverage.
Sun Life is one of Canada’s largest insurers and other insurance companies, despite early reticence, have followed in its path to provide cover for medical marijuana treatment.
Top 10 Performing Marijuana Stocks in 2019
The top 10 companies in the field (excuse the pun) ranked by market capitalisation are:
- Canopy Growth (CGC)
- Aurora Cannabis ACB)
- Tilray (TLRY)
- Cronos (CRON)
- Aphria (APHA)
- HEXO (HEXO:CA)
- OrganiGram (OGI:CA)
- CannTrust (TRST),
- Green Organic Dutchman (TGOD:CA)
- TerrAscend (TER:CNX).
Investors need to be aware that the larger companies will have a dual listing, typically on the Toronto Stock Exchange and the New York Stock Exchange or Nasdaq.