Now that legalized marijuana is a reality in much of the United States with no long-term end in sight, it is the best of times to begin investing in marijuana stocks. When looking for marijuana stocks to invest in, the same principles and factors apply as in any other industry. To find out which marijuana stocks have the best return on their investment, first it is helpful to know what makes one worth its investment.
Why Invest In Marijuana Stocks
Just like any commodity, investing in marijuana stocks can be a risk. The same laws of supply and demand still apply to them. However, the recent Northern California fire that affected the industry should caution you to look out for short-term factors that can impact the price of the stocks.
Still, the potential for growth is unlimited, as nationwide support for legalization increases. As more states legalize it, that is sure to create more business opportunities, and thus more marijuana stocks to invest in. Until then, think about investing in marijuana stocks that are already available for sale on the NYSE, NASDAQ, or NDEV exchanges or as OTC stocks.
What Marijuana Stocks To Invest In
There are multiple companies that sell different types of marijuana products and/or commodities related to its cultivation. One such company is Novus Acquisition and Development Corporation, an OTC-traded insurance company for medicinal cannabis patients that went up 48 times its initial value in 2014 alone.
When picking a stock for a company that actually makes marijuana products, consider some of these more recent entries into the market:
Insys Therapeutics, a NASDAQ-traded manufacturer of proprietary cannabis sprays. Its stock went up 1700% in only two years.
AbbVie, Inc., the makers of Marinol and other similar pharmaceuticals. The company has grown to the point where its stock boasts a 23.52 P/E ratio, a $4.07 EPS, and a $2.84 Dividend & Yield.
The Scotts Miracle Gro Company does not actually manufacture cannabis, but cannabis growers use its products. The company is actually looking to start developing products specifically designed for it. Its stock is a minor miracle, too, with a 27.07 P/E ratio, $3.71 EPS and a $2.12 D&Y.
Aphria is one of the leading cannabis stocks on the Toronto Stock Exchange with a P/E ratio of 104.99. However, it pays no dividend. The company has recently expanded into the United States as well.
Other Canadian marijuana stocks traded on the TSE include Aurora Cannabis, Canopy Growth Corp, and MedReleaf.
How Much Marijuana Stocks Are Worth
Investing in marijuana stocks requires a reasonably sized initial investment. Since first-time investors may not have as much money to start off with, a low-cost stock, i.e. anything $25 a share and under, may seem like a more desirable option. Startup companies tend to be priced this way after their first IPOs.
However, a stock may be low-priced because the company may be in debt to the point where it is losing money or barely breaking even. The P/E, dividend and D&Y rates all reflect these. If a high-priced stock, such as anything over $50 a share, is not affordable to a first-time investor, a mid-priced stock in the $25-50 a share range might prove to be the wisest long-term investment.
Even a stock without a dividend can still be profitable if it has a high percentage-to-earnings ratio. Anything over 20 is above average, and the higher the rating, the greater the anticipated revenue. However, a company that does not have a P/E ratio is losing money and is best skipped over.
How To Invest In Marijuana Stocks
A good resource to discover which companies are selling stock is the Marijuana Index. Think of it as the Dow Jones Industrial Average of dank. It tracks the publicly traded marijuana stocks in both the United States and Canada and lists the top gainers, the top losers, and the most active stocks of the day. Covering over 300 marijuana stocks in total, it includes all sectors of the cannabis industry from agriculture and technology to real estate. It even covers hemp stocks as well.
The only thing the Marijuana Index does not offer is a means of actually buying the stock through the website itself. It does provide a valuable guide to how the market works in real-time.
Due to the scattershot and constantly changing nature of the laws regarding cannabis on the state, local, and federal levels in the United States, it may prove helpful to look for an in-person broker who can provide professional advice about the best marijuana stocks. If that is not an option, then simply use an online broker, such as Ally Invest, E*Trade, or TD Ameritrade. Check the commission rates, monthly fees, and whether they trade non-U.S. commodities first before setting up an account.
Are Marijuana Stocks A Good Investment
There are several pros and cons to buying marijuana stocks, as the list below demonstrates. What makes investing in marijuana stocks a good investment is the same thing that makes any other stock worth its trading price: a strong dividend, high earnings per share ratio, and an above-average P/E ratio. However, there are other factors to consider besides money.
Buying marijuana stocks is a way show support for legalization and take part in a burgeoning, innovative industry.
Marijuana stocks can help diversify an existing stock portfolio or form the basis of a new one.
Dividends can be either re-invested or claimed as cash.
It is a good way of making connections within the cannabis industry and keeping up-to-date on its latest news, trends and innovations.
Not all stocks are equally profitable; some of them can still lose money.
The United States government’s ever-changing stance on federal legalization has the industry concerned about what will happen in the future.
Some US states still have laws against the sale of cannabis, and it is difficult to tell how long it is going to take to get those laws repealed.
For all the trade-offs of investing in marijuana stocks as compared to other types of investments, the potential to make a profit is higher than ever, and so is the potential for growth in the industry. Even if some marijuana stocks offer more value than others, the most lucrative stocks are just waiting to be bought.