Marijuana Stocks by Industry

- May 16th, 2019

Investors have seen a rush in cannabis investment lead to a division of marijuana stocks by industry. Here’s what the space looks like today.

As the cannabis sector continues to mature, investors are gaining exposure to a variety of options in the marijuana investment market. The explosion of listings from marijuana companies in the past few years has led to the addition of sector-based divisions in the space.

While the overall cannabis space offers investors access to companies operating in a variety of industries, many firms are sticking with one particular point of entry to the cannabis space.

Market cap growth for public legal marijuana firms has raised some questions on the proper valuations for these companies, but positive sentiment for the marijuana business has led to a rush for new companies to list with increasingly diverse operations and business goals.

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Here are a few new sectors that investors can gain exposure to thanks to these marijuana stocks.

State legalization opens doors to US marijuana stocks

Cannabis investors have thrown their support behind the expanding list of publicly traded multi-state operators (MSOs) focused on the US sector.

While cannabis remains an illegal substance in the US at a federal level, several states have moved forward with legal cannabis programs that have propelled the launch of dispensary networks and cannabis products.

These state-based programs differ in how restrictive they are for marijuana legalization. Some states, such as California, Denver and Nevada, have legalized recreational use as well.

Thanks to these programs, companies have risen to offer consumers a variety of products, and they have been able to secure immediate revenue from cannabis sales.

Investing in these companies has provided some accelerated growth for shareholders. MSOs have expanded their reach and are investing in the new markets that are opening as legalization programs in the US move ahead.

“I think that the US companies have the confidence of investors and they’re going to be able to raise more capital,” Alan Brochstein, an analyst with 420 Investor, told the Investing News Network (INN).

Sentiment and market capitalizations for these companies have increased in 2019, with the potential for these MSOs to lead the sector once full legalization of cannabis takes place in the US.

Rise of hemp and CBD investing opportunities

Thanks to the passing of a farm bill in the US, federal laws for hemp changed and it became legal. This opened the doors to newfound interest in companies offering products in the health and wellness space derived from hemp.

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Cannabidiol (CBD) items have gained interest from consumers as novelty items aligned with health and wellness factors, not just a recreational use.

These products also offer an easier entry for consumers who may be intrigued by the cannabis plant but are unsure of traditional consumption methods.

Some firms have dedicated their entire business platform to these CBD products, giving investors an option in hemp stocks. Charlotte’s Web (CSE:CWEB,OTCQX:CWBHF) is one such company.

The majority of cannabis companies have expanded the reach of their business goals with the intention of launching products designed to appeal to consumers looking for CBD-based novelty items for the health and wellness space.

The mania for the CBD market has been met with words of caution from the scientific community, which has warned consumers that much is still unknown about the potential medical benefits of CBD.

In March, pharmacies such as CVS Pharmacy (NYSE:CVS) and Walgreens, a Walgreens Boots Alliance (NASDAQ:WBA) company, launched the sale of CBD items aimed at the health and wellness sector.

Retail starts to make its mark

In the US, a variety of MSOs hold vertically integrated operations, meaning that they have branded products available in stores.

The retail situation in the Canadian market is very different because provincial agencies were allowed to determine regulations on marijuana retail operations. This led to a division in the restrictions of these markets.

Companies such as Fire & Flower Holdings (TSXV:FAF,OTC Pink:FFLWF) and High Tide (CSE:HITI,OTCQB:HITIF) have moved forward with retail strategies that include uniform store experiences and branding. They will open across Canada as permitted.

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In April, Ontario, arguably the largest cannabis market in Canada, opened its doors to a privatized retail market with 10 initial stores across the province.

Stores from multiple parties, including some in partnership with licensed producers, were opened following a lottery selection process. More stores are set to open throughout the year.

Ancillary market in cannabis expands with the industry

Alongside the growth of the marijuana industry, ancillary business opportunities have risen to support the emerging space.

One of the biggest accompanying industries to cannabis has been accessories for the consumption of marijuana.

These products range from specialty bongs, materials for marijuana rolls, grinders and other dried flower-centric items.

As consumer demands have diversified, refined cannabis extracts have increased in market appreciation and interest has also risen for vaporizers, oil extracts and other novel methods of consumption.

Another sector that has risen alongside marijuana growers is the packaging industry, where the focus is on creating packaging for products sold to consumers.

KushCo Holdings (OTCQB:KSHB) specializes in the packaging industry for the cannabis market. This company offers an interesting perspective on the listing rules for marijuana-related companies.

“If anybody can uplist, we certainly have a good opportunity to do so,” Jason Vegotsky, chief revenue officer of KushCo, previously told INN, referring to a potential upgrade for the company to a senior exchange such as the NASDAQ or New York Stock Exchange.

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Medical marijuana research leads to potential future discoveries

Most of the Canadian producers don’t limit themselves with a pure medical or recreational focus. Rather, all companies trading in the stock market pursue consumers across the board.

The medical market is poised to be dominated in the future by the medical research done by companies investigating compounds of the cannabis plant for the treatment of serious diseases.

In June 2018, GW Pharmaceuticals (NASDAQ:GWPH) shocked the world by securing an approval from the US Food and Drug Administration (FDA) for its proposed drug Epidiolex.

The pharmaceutical CBD-based product is designed to treat seizures associated with Lennox-Gastaut syndrome and Dravet syndrome.

“Today’s approval of Epidiolex is a historic milestone, offering patients and their families the first and only FDA-approved CBD medicine to treat two severe, childhood-onset epilepsies,” Justin Gover, GW’s CEO, said in a press release when the drug was approved.

This approval was seen as the FDA moving forward with an inclination to approve of the benefits of medical cannabis-based medicines.

Investor takeaway

As the marijuana sector continues to expand in the public market, investors have a variety of options to gain exposure to this space.

The marijuana sector is set to disrupt other industries as its adoption continues across different markets.

Players from established industries — such as alcohol, tobacco and pharmaceuticals — have made an early entry into the cannabis space by way of investment partnerships with marijuana companies.


INNdepth

Want more details? Check out these articles for more INNdepth coverage.

Want an overview of investing in cannabis stocks? Check Investing in the Cannabis Industry


Don’t forget to follow us @INN_Cannabis for real-time news updates!

Editorial Disclosure: High Tide is a client of the Investing News Network. This article is not paid-for content.

Securities Disclosure: I, Bryan Mc Govern, hold no direct investment interest in any company mentioned in this article.

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