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Mike Reilly

1 year ago

The Green Gold Rush: How to Invest in Marijuana and Earn Profits in 2021

After increasing in value for the past two years, US marijuana stocks are forming stable patterns and show monthly growth. But is the hype around weed legit? Should you invest in cannabis stocks right now? Read our complete guide:

Ever since the USA started the marijuana legalization trend, the cannabis market has been booming, making way to numerous “green” companies to go through IPO. during 2018-2019, the marijuana industry has rolled over $26 billion in funding deals and M&A (Mergers & Acquisitions). Moreover, worldwide spending on weed is predicted to cross the $63.5 billion mark by 2024. With such impressive growth rates, it’s no wonder that many investors are interested in publicly-traded cannabis stocks.

That’s a colossal sum of money for a relatively young industry.

Some of the top weed stocks offered for trade are:

  • Harvest Health & Recreation Inc. (HARV.CX)
  • TerrAscend Corp. (TER.CX)
  • Village Farms International Inc. (VFF.TO)
  • 4Front Ventures Corp. (FFNT.CX)
  • Green Thumb Industries Inc. (GTII.CX)
  • Cresco Labs Inc. (CL.CX)

And the list gets longer with every passing month.

Until now, investors were unsure whether it’s wise to put any money on marijuana and hemp stocks. Even before the COVID-19 pandemic hit, market analysts predicted hardship for the industry, as financing began to dry up.

Major layoffs and executive departures among the top players affected investors’ sentiment. And the fact that primary producers, like Aurora Cannabis (ACB) and Canopy Growth (CGC), have scaled back did not contribute to the green stocks’ reputation.

But the situation today is that cannabis stocks are settling into tighter trading patterns, and becoming a real alternative for more traditional agriculture stocks.

Follow this guide to learn how to become a successful cannabis stock trader:

What Are the Types of Marijuana stocks?
There are four types of cannabis companies that are traded on the financial markets:

  1. Biotech and Pharmaceutical Companies – Just like other medical providers, these companies focus on researching, developing, and producing cannabis-based prescription drugs.
  2. Growers and Producers – Organizations that cultivate, grow, and sell cannabis, including the dispensaries that distribute products.
  3. Ancillary Product and Service Providers – Companies that sell weed-related products (farming equipment, lighting systems), as well as management and consulting firms.
  4. Exchange-Traded Funds (ETF) – A collection of securities in a marijuana fund that tracks an index.

What to Look for Before You Invest in a Cannabis Stock
These are the steps you need to take when determining which marijuana stock to invest in:

  • Run the due diligence on the management team. Are they established? Have extensive experience? Did they manage to achieve success in previous projects?
  • Understand the company’s market cap (how the stock market sizes it up). The larger the market cap, the less prone it is to bankruptcy. If the market cap is below $2 billion – proceed with caution.
  • Check the company’s growth strategy and its competitive edge. Read press releases to see if there is constant progress in the company’s development and executive recruitment.
  • Examine the company’s finances. What is the company’s distribution channels reach? Do they target local areas? Do they export abroad? If you don’t mind the exposure risk, and international distribution is your fit.
  • Read what the influential analysts say about the company. There are thousands of amateur analysts roaming around the web, creating buzz around insignificant hemp companies. Is your company mentioned in the qualitative analysis reports of major financial publications such as Forbes, Bloomberg, etc.?
  • Is it included in prominent financial publications’ qualitative analysis?
  • Check how many warrants and convertible securities it issued. If they distributed a high number of warrants, it means the stock will be diluted, and the price-per-share will drop.
  • If it’s a grower/producer, check the cost of sales per gram (amortization, packaging, storing, and inventory adjustments). Growers with lower costs will tend to be more competitive.

How Much to Invest in Cannabis Stocks
There is no way to trade the markets with zero risks, and Marijuana-stock trading is no exception. So the best practice is always: Start small.
Start with 10-15% of your capital and add more shares as your portfolio grows. You might find out that you are a natural-born hemp trader, but don’t forget that this is a relatively new industry, and literally, ANYTHING can happen. Don’t go overboard and expose your trading portfolio completely.

The best way to invest in weed is to trade around the core (BUY in small amounts when the stocks are sinking and SELL small amounts when stocks are rising). Yes, this takes time and patience, but if you invest in it – it will pay off.

Start trading cannabis with 10-15% of your capital and add more shares as your portfolio grows.

3 Bonus Tips for Hemp Traders

  • To be a good investor is to be an informed investor. Create Google Alerts for related words like the stock symbols and cannabis companies you invested in.
  • Are you a conservative trader (not tolerant for risk)? Invest in stocks of companies that offer more than cannabis like Scotts Miracle-Gro. This multinational corporation also sells lawn, garden, and pest control products.
  • Go beyond marijuana and invest in CBD. CBD (or Cannabidiol) is a chemical compound in marijuana distributed in the form of oil. It is used for anxiety & pain relief, seizure prevention, and even cancer treatment. Financial experts predict that the CBD industry’s consumer sales will reach $2.1 billion in 2021.

Go beyond marijuana and invest in CBD stocks.

Are You Ready to Trade Cannabis Stocks and Earn Money?
As marijuana markets grow like a weed (pun intended), the global pandemic and investor sentiment can nip the green empire in the bud. If you decide to take the leap and trade in hemp, do your homework, stay informed, and trade with a platform that allows you to BUY and SELL quickly as the market fluctuates.

For more information and weed-trading tips, contact our financial specialists.

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