Just five years ago, few investors took cannabis stocks seriously. Today, as billions of dollars pour into the sector, few doubt that cannabis will be one of the next big disruptors. If you’re looking to invest in the cannabis boom, you can start here.
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Why invest in cannabis?
In the last couple of years, governments the world over have become less stringent on the use and production of marijuana and hemp products, paving the way for an explosion of new businesses.
In October 2020, New Zealanders voted on a referendum regarding recreational cannabis. The majority of voters 50.7% were against the proposed Cannabis Legalisation and Control Bill, while 48. 4% were for it.
A year after Canada became the second country to legalise recreational marijuana in 2018, the legal cannabis sector was estimated to be worth $150 billion, according to Euromonitor International. Between then and 2025, they predict the sector will grow by 2,000% globally.
How to invest in cannabis
There’s more than one way to invest in cannabis.
- Cannabis stocks. This means buying stocks on the share markets in cannabis companies or companies that have cannabis exposure. In New Zealand, we have just one company, Cannasouth, floated on the NZX.
- International cannabis stocks. Some of the biggest cannabis companies are listed on stock exchanges in overseas markets such as the US or Canada. It’s possible to invest in these if you use a broker that offers global stocks. Click on the ‘global’ list above to see some of these stocks.
- Cannabis ETFs. ETFs contain a bundle of stocks, usually hundreds, and these often track an index of stocks. There are around six cannabis ETFs listed in the US.
- CFD trading. You can trade cannabis stocks, ETFs or indices using CFDs. CFDs are contracts that allow you to make money on the price movements of an underlying asset, such as a share or commodity. Warning – these are complex products best suited to experienced traders.
How do I buy cannabis stocks?
- Choose a share trading platform.
- Open your account.
- Confirm your payment details.
- Find the shares you want to buy.
Cannabis products
While smoking weed is perhaps the most well-known use of cannabis, there are many types of businesses that are set to benefit from the growing sector. In other countries, legalisation of many of these products is still new and in some cases, still underway. These include the following:
- Medicinal products. Currently, medicinal cannabis is used in New Zealand for the treatment of the terminally ill and in the management of multiple sclerosis.
- Science and research. Recent policy changes mean that cannabis may be cultivated for medicinal reasons in New Zealand.
- Recreational use. Marijuana as a recreational drug is still illegal or restricted in most countries and in some cases carries serious punishment. However, legalisation is starting to occur in parts of the US and in all of Canada. It’s consumed to achieve feelings of relaxation or euphoria – but, there are also many risky side effects.
- Food products. Hemp is used as an ingredient in a range of products including cooking oils, snacks, protein powder, cooking flour and more. The sale of hemp food products in New Zealand was legalised in 2018.
- Building materials. Hemp is used in insulation and building construction materials and has several names, for example, hempcrete.
- Clothing. Hemp is broadly recognised as one of the most sustainable materials available in the manufacturing of clothing.
- Beauty products. Hemp is commonly used in various health and beauty products, such as moisturisers, lip balm, makeup and skin oils.
Marijuana vs Hemp
Unlike marijuana, hemp is not normally a narcotic. While hemp and marijuana come from the same cannabis plant, hemp has a lower component of the psychoactive THC – which means that it has no psychoactive effects. Typically, hemp is used in food products, building materials and textiles while marijuana is used for medicinal and recreational purposes.
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.
