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Cannabis: today’s big investment opportunity? | bestbrokers.co.uk


#1

Cannabis: today’s big investment opportunity?

Should we all be getting into cannabis? Or should that be “should we be investing in businesses that are part of this burgeoning sector?” The American and Canadian marketplaces are booming right now.


This is a companion discussion topic for the original entry at https://www.bestbrokers.co.uk/blog/2018/10/10/cannabis-today-s-big-investment-opportunity/

#2

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Several good points are raised here and probably well worth a deeper dive.

A little valuable background if I may, as follows:

  • Cannabis has been in use for various medical and recreational applications for over 10,000 years by ancient Chinese, Egyptian, Indian, Arab and Greek cultures, with medicinal marijuana only introduced to ‘the West’ in the nineteenth century – so it’s nothing new.
  • Cannabis remains the world’s most commonly used drug. Cannabis was the most commonly used drug in 2016, with 192 million people using it at least once in that year. The global number of cannabis users has since continued to rise.
  • Large-scale cannabis plant cultivation has been reported in over 145 countries – so there’s no shortage of growers already in the market.
  • According to the United Nations Office on Drugs and Crime (UNODC) statistics and data herbal marijuana dropped in price between 2012 from $1,585 per kilo to $1355 per kilo in 2016 and continued to fall.
  • In the USA nine states, Alaska, California, Colorado, Maine, Massachusetts, Nevada, Oregon, Vermont, and Washington, the District of Columbia, and the Northern Mariana Islands have legalised the recreational use of cannabis - with seven of these nine permitting its commercial sale. Another 14 states have effectively decriminalised cannabis.
  • Currently, 31 states have legalised medical use of cannabis.
  • In the UK cannabis has been classed as prohibited drug since 1928 – so it may have come as a shock to a few but no real surprise to most that, in July of this year the Home Secretary announced that medicinal products derived from cannabis would be legal for patients with, what he carefully termed, an "exceptional clinical need".

Ok, but what does that all mean? In (my humble :thinking:) opinion, the first four points pretty much negate any advantage gained by the latter three.

More than that, marijuana is a commodity, and commodities markets are subject to booms and busts.

First and foremost, it is a plant which will suffer and/or benefit from all the impacts that influence other crops.

Also, we’re not going to see a sudden upsurge in consumer demand – home cultivating to fulfil personal requirement is widespread.

At the moment there is a cannabis craze running through Wall Street with volatile trading sessions on some of the major ‘pot stocks’ of the likes of Tilray, Cronos, Aurora and Canopy.

We’re seeing a lot of hype here, and many are being drawn into a feeding frenzy not too dissimilar to that we saw at the height of crypto-currencies.

It’s not my choice of stock at the moment - but, to each their own. I would just advise that, by all means trade in these stocks, as long as it’s with money you can afford to lose.


#4

So what are your thoughts on this now Rick, given recent ‘developments’?


#5

Ok Trudy, I’ll eat a (very) small slice of humble pie on this if that makes you feel any better :wink:

I got a call from an old friend this morning with those hard to accept words “I told you so”.

What on earth was he on about?

Well the US mid-term events have had a ripple effect on the marijuana market it seems. I expect there are quite a few Mary Jane investors out there who were surprised to get a lift in the market courtesy of Donald Trump – as his alleged ‘request’ that AG Jeff Sessions resign has removed one opponent of legalisation from the equation.

That resignation, plus the vote in the state of Michigan (the 10th overall) to legalise recreational usage and the votes in two other states, Missouri and Utah, to legalise medical marijuana prompted a broad increase in cannabis companies share trading. So now we have a majority of US states, 33 in all, who have legalised some form of marijuana use.

Ok, I admit it, the early worms have probably got a little of the bird…just.

Having noted all that I still stand by my original statement that this is a stock to be more than wary of and that very close scrutiny needs to be undertaken of the debt/equity ratios of many of the marijuana stocks.

For example look at Tilray, with a market cap of some $13 billion dollars but hugely contrasting and significantly smaller revenues of just $10 million dollars a quarter. Basic diligence shows that TLRY sold $10 million dollars of products but lost $12 million dollars. This, and many other marijuana stocks, appears to mirror a pattern seen in the dot com bubble stocks a while back.

Whilst there are hints of some major established players in non-aligned industries, such as the rumour that Coca Cola could possibly present cannabis-infused beverages to the market in the near future, I just don’t see this as a long-term high, pardon the pun.

The other factor to consider is that those considering a short-term ‘flutter’ on this have jumped on the band-wagon already – this severely limits any leverage to work the stocks higher right now; any more short-sellers entering now, enticed by the current media hype, will force the stocks downward.

https://www.bloomberg.com/news/articles/2018-11-07/cannabis-stocks-spike-as-anti-pot-ag-jeff-sessions-resigns


#6

I believe that it’s a good thing to invest in. After all, politicians all over the globe become more liberal to cannabis. And there are so many products can be made of it. Oils, for instance, are really popular nowadays. Take a lot at one of them
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