Considering Investing in Cannabis Stocks? Here’s Some Insight

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While many wannabe investors are looking into cryptocurrency, others are focusing on the green run.

Cannabis company stocks rose with the news of Democratic Senate candidates Raphael Warnock and Jon Ossoff defeating Republican opposition. Since Joe Biden was elected president, these stocks have been outperforming equity markets.

Nasdaq reported Canopy Growth Corp (CGC) jumped 15 percent, with other industry leaders, including Cronos Group (CRON) and Aurora Cannabis (ACB), experiencing considerable upticks. Since the beginning of November, the Cannabis ETF (THCX), responsible for tracking 30 cannabis stocks, is currently up over 60 percent.

“Everything suggests that a Biden administration will federally legalize cannabis,” John Ramsay, CEO of Infinite CBD, explained to Nasdaq. “If this happens, it is going to create more multistate operators, broaden the cannabis industry, create more jobs, generate more taxes, offer more products, produce more incomes in lower-income sectors, and undoubtedly cause a spike in the value of cannabis stocks.”

But what other cannabis stocks should you consider? Here are some of the options:

Scotts Miracle-Gro (NYSE: SMG)

Scotts Miracle-Gro (NYSE: SMG) has existed for quite some time now. However, it only just recently became directly involved in the cannabis sector with its Hawthorne acquisition. This was a smart move for the company as the cannabis sector continues its growth.

The Hawthorne segment of Scotts is a hydroponic gardening equipment company that caters to the cannabis industry. These grow systems use pipes and pumps and make home and professional grow operations more efficient.

Hydroponics also doesn’t need soil to grow high-quality herb. With this in mind, this equipment makes it easy for people to grow cannabis at home. As the cannabis industry continues its expansion, we can expect more people to dive into cannabis cultivation–whether as a business or hobby–giving good reason to assume Scotts will continue expanding with cannabis.

Furthermore, Scotts released its year-end results for the period that ended in late September. Its revenue was up 31 percent at $4.1 billion after profiting from increases in some of its key segments. Also, the company’s U.S. consumer segment distributed conventional gardening products inflated by 90 percent throughout the fourth quarter with a 24 percent rise for the entire fiscal year.

Much of this growth resulted from the pandemic. With gardening activities becoming more popular, it makes sense that Scotts would experience an uptick.

Village Farms International (NASDAQ: VFF)

EcoWaste reported that Village Farms International is also interesting for potential cannabis investors. The British Columbia-based company reported an impressive $122.7 million in sales for the last nine months, boasting 10 percent growth compared to the same period last year. During this time, the company generated $4.6 million in profit, and even though this number is down from $9.5 million the previous year, it’s not hard to imagine these numbers improving in 2021.

Village Farms’ acquisition of Pure Sunfarms has made the company even more appealing to investors. It had a majority stake in PS at 58.7 percent before purchasing Emerald Health’s ownership for $60 million. With this acquisition, the company will no longer have to share the benefits. Pure Sunfarms has consistently turned a profit for the previous seven periods, offering a good reason to expect this trend to continue.

Concluding on Cannabis Stocks

While we’ve seen many publicly traded stocks, including Curaleaf (OTC: CURLF) and Cresco Labs (OTC: CRLBF), increasing their year-over-year quarterly revenue by triple digits in 2020, the momentum may continue into 2021. According to The Motley Fool, these stocks are still rising impressively. However, it’s important to note that you should conduct research for yourself, regardless of what anyone tells you.

The industry is consolidating, with some cannabis companies merging. For instance, the Aphria and Tilray merger should create the largest public cannabis company in the U.S. But even as many of the cannabis sector’s smaller entities remain unprofitable, we can expect some to begin reporting consistent earnings in 2021, showcasing financial health improvements that savvy investors will appreciate.

Keep in mind; many companies haven’t moved towards profitability, even with years of effort and incredibly ambitious plans. Thus, some stocks could be poor investments. Many investors lost big on Aurora Cannabis after its stock lost more than half its value in 2020.

Regardless of which stock you invest in, remember to avoid investing capital you cannot afford to lose. While your investment could be life-changing, there’s always a chance for it to go south.

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