The cannabis stock market appears to be consolidated. Is this the right time to start?
Cannabis boom on the stock markets
Cannabis (hemp) was banned for decades and still is in many parts of the world. Recently, however, trends have emerged that reinforce legitimate hopes that banning the hemp plant will soon be a thing of the past. In many countries, such as Uruguay, Canada and several states in the United States, cannabis can be used for recreational purposes.
Medical use is now permitted in many countries. Seedbanks work like crazy on varieties to create potent strains like the hybrid Amnesia Haze by Royal Queen Seeds. Specialized online stores ship these seeds all over the world, where they find appreciative buyers. But it is mainly the companies that spring up like mushrooms that promise lucrative investments. The early bird catches the worm, leaving many investors wondering if now is the right time to start investing in cannabis stocks.
The cannabis market is consolidated
The legalization of cannabis in Canada and California was accompanied by a first cannabis boom in 2018. At the time, there was a gold rush atmosphere and overcapacity in a super euphoric market. No one could smoke as much as there was cultivation and production. That is the reason why the good mood in the stock market as quickly as it came. By March 2019, many securities went down and lost up to 80% of their value in a short period of time.
But the rapid rise and extreme decline has been accompanied by consolidation, manifesting itself in mergers and a large-scale market shake-up. Now it appears that the wheat has been separated from the chaff and that most well-positioned companies are dominating the market.
Cannabis stocks in 2021
And so these market changes paved the way for another boom. Further legalization efforts, in particular the decision of the UN (United Nations) in December 2020 to remove cannabis from the list of dangerous drugs, sparked the imagination and since then the share values of listed cannabis companies have risen sharply again.
The top-rated companies in the industry are still Canadian. After all, they ensured that the cultivation surfaces were sufficiently dimensioned, which we now benefit from.
Tilray & Aphria
Even before their merger both Aphria and Tilray were among the market leaders. British Columbia's Tilray received early approval to produce therapeutic cannabis. The company supplies its products to doctors, hospitals, authorities, pharmacies and researchers worldwide. Tilray is also one of the leading players in the research, production and distribution of medical cannabinoids.
Aphria comes from the lifestyle corner. Founded in Ontario in 2014, Aphria now has locations all over the world and is known, among other things, for being responsible for the cultivation and production of medicinal hemp in Germany. After the merger, the company will become the market leader with an annual turnover of EUR 568 million.
Canopy Growth & Canabis Supreme
Also founded in Ontario in 2014, Canopy Growth sells hemp and cannabis equipment and offers a variety of brands and varieties of hemp. Subsidiaries in Germany sell medical devices and preparations. Canopy Growth is present on five continents with more than a dozen offices.
The company wants to merge with Supreme Cannabis to strengthen its market position. Supreme Cannabis is a global producer with numerous brands and an extensive sales network, which is brought in as a bridal gift.
Cannabis stock indices
There are now a number of indices that can be invested in. Mention should be made of the Prime Alternative Harvest Index, which comprises 2021 stocks as of April 31. The Medical Cannabis and Wellness Equity Index currently contains 33 stocks and the Foxberry Medical Cannabis & Life Sciences Index tracks 23 companies. You can also invest in many ETFs (Exchange Traded Funds).
Cannabis stocks – buy or hold?
As so often, the opinion of the experts is divided. The market is currently overvalued, very volatile and more suitable for short-term investments. The chances of winning are great, the danger of falling is great.
In the background, however, market growth beckons. Especially with advancing legalization, the market research “Cannabis Market to 2027-Global Analysis and Forecast” projects a tenfold increase in volume within eight years to US$150 billion.