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Investing in cannabis stocks in Ireland

Pot stocks to watch if you're looking to invest in the cannabis boom from Ireland.

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In only a few years, cannabis has emerged as one of the biggest disruptors in markets around the world — Ireland included. Today, as billions of dollars pour into the sector, investors in Ireland are keen to take part in the marijuana boom. But before you add marijuana stocks to your portfolio, consider how the legality issues that surround this product may impact profits.

What is cannabis?

Cannabis refers to plants Cannabis sativa, Cannabis indica and Cannabis ruderalis. This plant can be processed for a variety of purposes, from topical oils and food products to building materials — but it’s popularly grown and consumed for its psychoactive properties.

Cannabis legalisation is a divisive subject worldwide. In Ireland, cannabis consumption for recreational purposes is illegal according to the Dangerous Drugs Act, which was passed in 1934. Penalties for possessing cannabis range from fines to imprisonment. Medical cannabis, however, may be approved by the Minister of Health, on a case by case basis. The closest that Ireland has gotten to cannabis legalisation was in 2016, where a bill to legalise cannabis for medicinal usage passed second reading in the lower house.

On the other end of the spectrum, the U.S. is one of the most important markets when it comes to cannabis legalisation. Some states, like Washington, Vermont and California, have legalised both recreational and medical marijuana consumption. Others, like Utah, Arizona and New York, only permit marijuana consumption for medical purposes.

For curious investors, cannabis stocks are shares of any company that grows, harvests, sells, manufactures, or distributes cannabis — including hemp.

Marijuana vs. hemp

Unlike marijuana, hemp is not a narcotic. While hemp and marijuana both come from the cannabis plant, hemp has a lower component of the psychoactive THC — typically less than 0.3% — which means it has no psychoactive effects.

Typically, hemp is used in food products, building materials and textiles. Marijuana, on the other hand, is primarily used for medicinal and recreational purposes.

How do I buy cannabis stocks?

  1. Choose a stock trading platform in Ireland. If you’re a beginner, our table below can help you choose.
  2. Open your account. You’ll need to provide your ID and bank account information.
  3. Fund your account. Before you can start trading, you’ll need to fund your account with a bank transfer.
  4. Search for stocks. Use a stock screener to sort and filter stocks.
  5. Submit your order. Once you’ve found a stock you’d like to buy, indicate how many you’d like to purchase and submit your order.
  6. Monitor your investments. Log in to your brokerage account to track the performance of your portfolio.

Cannabis stocks

There are currently no cannabis stocks available for trading on the Euronext Dublin. Instead, you can turn to pot stocks on international stock exchanges like the London Stock Exchange (LSE) or New York Stock Exchange (NYSE). If you’re interested in other international cannabis stocks, you’ll need a brokerage account that offers access to global or over-the-counter stocks.

Some popular cannabis stocks to consider are Kanabo (KNB) on the LSE, Aurora Canabis Inc (ACB) on the NYSE and Aphria Inc (APH) listed on NASDAQ.

Which ETFs track cannabis?

ETFs contain a bundle of stocks, usually hundreds, and these often track an index of stocks. While there aren’t any cannabis ETFs available on the Euronext Dublin, you can access Europe’s first medical cannabis ETF on the London Stock Exchange through the ticker CBDX. The ETF tracks a medical cannabis and wellness equity index, which consists of companies involved in legal professional activities across nine sub-sectors in the medical cannabis, hemp and CBD industries.

There is also a handful of cannabis ETFs listed in the U.S.

  • AdvisorShares Pure Cannabis ETF (YOLO)
  • Cambria Cannabis ETF (TOKE)
  • ETFMG Alternative Harvest (MJ)
  • Horizons Marijuana Life Sciences (OTC:HMLSF or TSX:HMMJ)
  • The Cannabis ETF (THCX)

Why invest in cannabis stocks?

Despite its lack of legality in numerous countries, cannabis is a popular product. This is clearly seen by improving receptiveness to canabis legalisation around the world.

While cannabis usage is restricted in Ireland, key stakeholders have indicated an interest in pushing for its legalisation. Donnelly, who became a minister in the 2020 cabinet, said that he was receptive to the liberalistion of certain drug laws in Ireland. Green Party health spokesperson Ossian Smyth also raised the topic of cannabis legalisation during government negotiations in 2020.

Beyond the Irish borders, recreational marijuana is legal in more than 10 states in the U.S. and medical marijuana is permitted in over 30 states. Additionally, countries like Canada, Jamaica, and Uruguay permit recreational usage of marijuana subject to some restrictions.

As more countries become accepting of medical and recreational marijuana use, the cannabis market will grow. And as the cannabis market grows, so will sales, profits, and company valuations. Statista reports that in 2018, the global cannabis sector was worth $13.8 billion. By 2025, it predicts the sector will swell to $43 billion. The cannabis market is one poised for growth — and for investors in Ireland, growth means profits.

Risks of investing in cannabis

Positive growth projections aside, cannabis may not be a practical addition to your portfolio. And that’s because this sector is riddled with risks — many of which stem from the legality issues that surround the product.

As laws that surround the legalisation of recreational marijuana continue to shift, investors must be wary about how such laws could impact the companies in their portfolios. For example, high tax rates have the potential to cripple cannabis providers. In California, consumers are taxed close to 45% for recreational cannabis. With taxes that high, it’s little wonder that Golden State consumers turn to the black market to purchase their product, leaving cannabis providers high and dry. In such a case, Irish investors considering cannabis companies based in California should be wary.

Financing for cannabis companies is also a concern, as cannabis companies are seen as high-risk merchants in the eyes of many financial institutions. As a result, many of these banks aren’t willing to provide essential banking services and funding must be found elsewhere. One way cannabis companies can raise funds is to issue common stock, but this dilutes the holdings of existing investors.

Overall, the global cannabis market seems to be gaining traction. And for investors in Ireland that can tolerate risk, this is an exciting prospect. But ultimately, the variables that factor into the profitability of this market are constantly in flux — and this sort of instability can lead to price volatility.

Market projections for Cannabis stocks

The global cannabis market as a whole is expected to grow. However, it is expected to gain most significant traction in the U.S. The market value of the cannabis industry in the U.S. is projected to climb to $30 billion annually by 2025, according to New Frontier Data. Besides this, more U.S. states have aimed at relaxing laws around its usage. New Jersey, Arizona, Montana and South Dakota in December 2020 approved ballot measures to legalise the recreational use of marijuana.

Still, the future of the cannabis industry is still foggy — both in Ireland, the U.S. and other international markets. So it’s important for investors in Ireland to carefully analyse cannabis stocks and understand country-level policies to find where potential long-term winners may be.

    Compare trading platforms

    Before you can buy cannabis stocks or ETFs, you’ll need to open a brokerage account. Explore your platform options below.

    warning iconWarning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. Between 74-89 % of retail investor accounts lose money when trading CFDs. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
    Name Product Standard Brokerage Fee Markets Products
    DEGIRO
    IE stocks: €2 + 0.05%

    US stocks: €0.5 + US$0.004 per share
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    eToro
    US stocks: $0
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    Saxo Markets
    Saxo Markets
    IE stocks: €12

    US stocks: US$7
    Global
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    Zacks Trade
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    US stocks: US$1
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    Marijuana products

    While smoking weed is perhaps the most well-known use of cannabis, there are many types of businesses that are positioned to benefit from the growing sector. As more cannabis products are given the green light, we’ll see the market continue to expand. The legalisation of many of these products is new and in some cases, still underway:

    • Medicinal products. Medicinal cannabis is used for the treatment of cancer pain, epilepsy, palliative care, chemotherapy nausea, neuropathic pain, anorexia and neurological conditions. Cannabidiol, also known as CBD, is a derivative of the marijuana plant that’s become increasingly popular for medical uses in recent years.
    • Research. The scientific study of marijuana has accelerated in recent years with the discovery of many other beneficial compounds besides the psychoactive THC.
    • Recreational use. Marijuana as a recreational drug is still illegal or restricted in many countries. That said, legalisation of both recreational and medical marijuana continues to roll out across the U.S. The plant is consumed to achieve feelings of relaxation or euphoria, but negative side effects have been reported, including headache, dizziness, nausea, delusions and hallucinations. Long-term use of the substance may cause cannabinoid hyperemesis syndrome (CHS).
    • Food products. Hemp is used as an ingredient in a range of products, including cooking oils, snacks, protein powder, cooking flour and more.
    • Building materials. Hemp is used in insulation and building construction materials under several names, including hempcrete, hemp masonry and hemplime.
    • Clothing. Hemp is broadly recognised as one of the most sustainable materials available in the manufacture of clothing.
    • Beauty products. Hemp is commonly used in various health and beauty products in the U.S., such as moisturisers, lip balm, makeup and skin oils.
    Disclaimer: The value of any investment can go up or down depending on news, trends and market conditions. We are not investment advisers, so do your own due diligence to understand the risks before you invest.

    Bottom line

    While cannabis is not legal in Ireland, the global legal cannabis sector is positioned to grow in the coming years and there are a number of ways for investors in Ireland to profit. But keep in mind that past performance is not a guarantee of profit and all investments come with inherent risks.

    Frequently asked questions

    Disclaimer: This information should not be interpreted as an endorsement of futures, stocks, ETFs, CFDs, options or any specific provider, service or offering. It should not be relied upon as investment advice or construed as providing recommendations of any kind. Futures, stocks, ETFs and options trading involves substantial risk of loss and therefore are not appropriate for all investors. Trading CFDs and forex on leverage comes with a higher risk of losing money rapidly. Past performance is not an indication of future results. Consider your own circumstances, and obtain your own advice, before making any trades.

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