Cannabis stocks are highly volatile, but the market will likely make a comeback
The volatility of the financial markets is also visible in the cannabis sector. Prices of cannabis shares are fluctuating, bringing huge losses to some investors. However, cannabis stocks can still offer a great opportunity for those who know which parameters are important. Weak cannabis companies will very likely go bankrupt, while the others will bounce back after the Corona crisis.
Cannabis stocks are currently going up and down on the financial markets and those who trade as day traders on a daily or weekly basis can sometimes achieve peak returns. At the same time, many long term oriented investors are suffering from this rollercoaster ride, which of course was already accompanied by heavy losses before the current coronavirus pandemic.
It is well known that professionals like to buy securities when the markets are in turmoil because then it can hardly get any deeper. Cannabis stocks offer great opportunities for investors who take a closer look at the market, despite all the dangers.
It is quite possible that the cannabis industry will emerge strengthened from the virus crisis, even if this could, of course, be accompanied by a major and certainly brutal cleanup. Here are three possibilities, how investors can position themselves and which parameters are especially important for the cannabis branch on the capital market.
If you want to find out how the cannabis market will bounce back after the Corona crisis and to discover the latest cannabis news in the world, download the Hemp.im mobile app.
Cannabis as medicine achieves the final breakthrough
In the USA, cannabis has been declared essential as a medicine in many places even during the Corona crisis. In addition, more and more countries are turning to cannabis as an effective natural treatment. Cannabis is extremely popular as an effective therapeutic agent for pain, sleep disorders or nausea. Even rigid guidelines like those in Germany cannot stop its popularity.
While hospitals and medical practices are overflowing with COVID-19 patients and more and more drugs are running out, people are staying at home and trying alternative forms of treatment. Many new interested parties and medical cannabis patients are increasing the pressure on drug policy, which for far too long has focused on myths instead of real results, as in Germany.
Weak cannabis companies will go bankrupt
Owners of cannabis shares of companies that will more likely go bankrupt are now in distress. However, the current situation sharpens the view on the cannabis industry and really worthwhile securities – whoever survives 2020 and Corona as a company has huge potential!
Of course, this does not mean that all cannabis stocks still circulating after the end of the pandemic are a buy. However, the selection will be simpler and profits made can be analyzed more easily. At the moment, even outperformers are badly off because the whole market is crashing. Regardless, smart investors keep an eye on companies that are actually doing top deals and have dropped in price just because of the general COVID-19 hysteria.
New forms of business like cannabis delivery services are starting up
Sure, there have been a few attempts here and there, but the megatrend of social distancing, pushed by general surveillance and government control, should provide additional impetus for cannabis ordering online and the corresponding delivery to the front door.
In the USA, more and more states allow this since the beginning of the crisis. Furthermore, the drive-in like fast-food chains is very fashionable for cannabis at the moment. The high demand helps the economy and clears the way for new, innovative companies.
What should investors in cannabis stocks do now?
Investors in cannabis stocks should keep their calm. On the one hand, of course, there needs to be a decrease in the number of infections or more convalescents per day than new infections, on the other hand, the states need to boost their economy again, open the borders, switch to normal mode. This is not going to happen in the next few days, and probably not for more than a few weeks. Consequently, for the time being, prices are likely to fluctuate strongly and repeatedly test their bottoms down the chart.
A check of the equity ratio, investments, and cash flow is recommended. If a company has a thick cushion here, then it will probably get through the crisis and then attack again fully, from a doubtlessly thinned out market environment with less competition.
Mass layoffs or difficulties in production due to new hygiene rules and the like are not such good aspects, but they can help with the aforementioned shakeout. An intensive analysis of the charts is helpful, with investors looking at which price level there is particularly high buying or selling volume.
After all, professionals in the capital market are still a pretty good indicator of the outlook on the stock market in their herd behavior, also and especially for cannabis stocks in 2020.
(Featured image by PublicDomainPictures via Pixabay)
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First published in THC GUIDE, a third-party contributor translated and adapted the article from the original. In case of discrepancy, the original will prevail.
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