High Time to Invest in Medical Marijuana?

Valued at $15.74 billion in 2020, the medical marijuana market is expected to reach $41 billion by 2026 with a CAGR of 17.79 percent. There are many reasons why the demand for medical marijuana is on the rise. In the United States, the most direct cause of an increase in marijuana consumption is the progressive legalization of medical marijuana across multiple states since the last election. With legalization comes more recognition and acceptance, particularly in the medical field where doctors can now prescribe medical marijuana for a range of issues such as muscle spasms, nausea, poor appetite, nerve pain, and anxiety.

With legalization also comes increased investment potential. Since medical marijuana is a relatively young industry, we are looking at a hyper-growth market where there are very few entrenched players and niche owners. New players are entering the market constantly, keeping it innovative and competitive. Venture capitalists and private funding firms have their eyes trained on the market, with Snoop Dogg’s cannabis-focused Casa Verde pouring millions into cannabis start-ups.

Drugs In Demand

When thinking about cannabis users, people often picture the younger and less conservative demographic getting high to cope with existential dread. So, it might be interesting for investors to remember that baby boomers are now coming to an age where they need pain relief. Let us not forget that many of these boomers grew up through the hippy movement of the 1960s and are more than happy to turn to legal herbs to ease their sore hips and joints. Baby boomers, who were well set up by the post-WWII economic expansion, are known for their deep pockets and purchasing strength. They represent 70 percent of the disposable income in America and are expected to receive $15 trillion worth of inheritance in the near future. With this powerhouse generation getting older, the healthcare field is poised to rake in profits as boomers spend on supplements, pharmaceutical drugs, cosmetic surgery, and—of course—medical marijuana.

As states and regions look to harness the monetary potential of the legal marijuana market, it is expected that licensing will bring a new and welcomed source of tax income, at the same time helping to reform industry standards and create a more robust business environment. From real estate trading of agricultural plots and custom laboratory equipment to research and development, patents, and proprietary blends, there are a myriad of ways that industry players can edge forward in the market. The good news for investors who are leery about legal issues in the US is that even if medical marijuana is illegal in certain states, it is completely legal to trade top medical marijuana stocks of companies in the medical marijuana sector, regardless of where you live. Besides, as stigma around cannabis use dissipates and increasing research proves the benefits of medical marijuana, the market is only going to expand and move forward.

Your Slice of Medical Marijuana

There is no denying that medical marijuana is generating a lot of trading interest. With a few million people suddenly being granted access to medical marijuana for the first time, demand is far outstripping supply. And because it can be legally complicated to transport cannabis (which remains a Class 1 drug in the US) across state and national borders, many businesses have a captive audience. Whenever fresh research is published linking marijuana to a medical treatment, medical marijuana penny stocks heat up. The same applies to news about the legalization of cannabis-facilitating bills such as the 2018 Farm Bill, which resulted in a surge in marijuana stocks. With more and more companies entering the cannabis market and trying to carve out a niche of their own, investors have additional opportunities to profit.

Unfortunately, it can be hard to choose the right stocks to invest in. There are a variety of cultivators, manufacturers, biotech and pharmaceutical companies, distributors, and service providers for investors to choose from. An example of a massive pharmaceutical player is GW Pharmaceuticals (NASDAQ: GWPH), producer of the FDA-approved cannabinoid-based drug Epidiolex. On the other hand, there are many smaller companies that bank on the ancillary with significant potential for growth, including GrowGeneration Corp (NASDAQ: GRWG) who produce specialty hydroponic equipment, and High Tide Inc. (NASDAQ: HITI) who focus on distribution, cannabis-use accessories, and lifestyle products.

While possessing great potential, medical marijuana stocks can be stressful for the nervous investor. Because of the legal ambiguity of marijuana, regulations are almost always in a state of flux. Companies must be prepared to react swiftly to changing laws and remain innovative to retain their share of the market. As with most rapidly expanding industries, many aspiring cannabis-related startups will fail. Some companies may issue more shares to build capital for expansion, causing a drop in the value of the shares that you hold. Therefore, anyone looking to invest in medical marijuana stocks first must undertake some very thorough research. The future for the medical marijuana market seems to be lush and full of promise. By seeking expert advice and doing comprehensive research, investors can benefit from this green revolution. 

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(Featured image by Ryan Lange via Unsplash)

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