Playing the stock market is risky on its own, but cannabis stocks are on another level. What could be riskier than investing in an industry built around a plant that is still illegal on a federal level? But let’s not forget the old saying: “No risk, no reward.” And few industries have produced the kind of rewards people expect from the cannabis industry. Interested in investing in cannabis stocks? Today, we’re going to discuss what you should be looking for when purchasing stocks in cannabis companies as well as highlighting the best cannabis stocks based on a variety of factors. The landscape is always changing, so be ready to buy fast and think faster!
Get to Know Your Options for Investing in Cannabis
The option to purchase cannabis stocks is a recent development but as of this writing, you can invest in 10 cannabusinesses in North America that are already supported by market capitalizations of at least a billion dollars. Some of these companies are even based in the U.S. Since 2019, cannabis ETFs (exchange-traded funds) have also been in circulation, if you’re more interested in adding ETFs to your portfolio. No matter your strategy, cannabis investment is finally a real, accessible option. But as the cannabis industry is different from a lot of other established global industries, so too are cannabis stocks a bit of a different gamble than more traditional stock investments. Here are a few factors to keep in mind when investing in cannabis.
Why You Might Want to Invest in Cannabis Now
Now is a pretty fortuitous time to invest in cannabis, even if it may seem like a federally illegal substance is riskier than its worth. In early 2021, cannabis stock prices took a dive, mirroring similar behavior in other cutting edge stock options in areas such as gaming, technology and electric automobiles. However, the leading cannabis companies at the time also reported final quarterly growth in the 10% to 15% range as a result of building investments and ramped up production lines. Let’s not forget that the cannabis industry is one of few that has remained fairly insulated throughout the pandemic thus far. While the introduction of a solid banking law for the cannabis sector would open the door to more investors, most lulls in cannabis stock prices may actually present a rare opportunity since the dive isn’t tied to the usual red flags in profit margins, investment flow and general growth.
Getting Started with Your Investment Research
So, where should you start? The Motley Fool, who used to be pretty skeptical about the future of cannabis stocks, has espoused a softer perspective in recent years as evidenced by a recent article in which they steer prospective investors to promising stocks in Green Thumb Industries, Columbia Care, and Tilray. But there really isn’t a “one size fits all” stock option, so we’re going to take a look at the best cannabis stocks for 3 different, yet common scenarios for prospective investors. We consulted Investopedia to get the November forecast on the best cannabis stocks. While they elaborate on this a bit more (hey, they specialize in investment and we’re a wholesale business for ancillary products), we have compiled the ultimate best cannabis stock for each category that they mention.
The Best Cannabis Stocks for Value
If you’re looking for the best bang for your buck (and who isn’t when it comes to an investment) Canadian company High Tide Inc. is one of the best cannabis stocks for value. High Tide specializes in the manufacturing and sale of retail cannabis products, a sector of the industry which still often posts net losses as they continue to bolster their inventory of equipment. They currently lead the other value stocks with the lowest 12-month trailing price-to-sales (P/S) ratio at 1.8. Price-to-sales is broken down as the amount you’re paying for the stock per dollar of sales generated by the company. After a series of acquisitions (and it seems more on the horizon), High Tideappear to be building a solid foundation for big things.
The Top Choice for Growth
If you’re more interested in companies that have some longevity behind them, the best cannabis stocks for you may be the ones that measure year-over-year performance. Currently, the top honor in this category goes to GrowGeneration Corp., an agricultural equipment distributor with an impressive 189.7% revenue growth. As one of the leading suppliers of hydroponics, GrowGeneration is a beacon to investors who are invigorated by the idea of a quickly rising cannabis stock.
The Best Stock Option for Momentum Investors
Finally, there are the best cannabis stocks for momentum investors: those seeking stocks that already have a healthy inertia behind them. These cannabis stocks are said to have “outperformed the market” meaning their stock price outpaced the market average. Topping this list with a whopping 12-month trailing total return of 242.7% is Sundial Growers, Inc., another Canadian company. Sundial Growers explores a wide spectrum of the cannabis industry with enterprises that touch cultivation, retail, processing and manufacturing. If you’re looking to join the surge, momentum investing may be for you.
Here at Master-Minded, our specialty is getting your business top-of-the-line ancillary products in a timely, reliable manner, so stock advice is obviously a bit outside of our wheelhouse. That’s why we want to reiterate that you should always do your own research before deciding for yourself which are the best cannabis stocks for your personal situation and strategy. Investing in cannabis can be exciting, but comes with risks just like any stock purchase. Learn the game, play to win, but also try to have some fun with it!