Whether you’re a proponent of pot or marching outside of marijuana dispensaries yelling “Hell no we won’t grow,” cannabis is here to stay. As the laws change, other things change as well, including the stock market. In fact, with recreational marijuana already legalized in a handful of states (and up for legalization in a handful of others) cannabis stocks are selling like hot cakes (and, in legal areas, hot cakes are selling like hot cakes too).
If you’re fiscally minded, or simply enjoy the draw of Wall Street, the investment opportunities surrounding cannabis are hard to disregard. The numbers alone entice: in 2015, the recreational marijuana industry increased by 17 percent (5.4 billion dollars). This year, it’s slotted to increase by 25 percent more.
You don’t have to be a broker to see the value of investing in the trade. Even medical marijuana on its own makes the capital alluring: combined with recreational, the entire industry is projected to top 40 billion over the next decade.
MassRoots and Business Pursuits
Some marijuana companies are attempting to ditch their penny stocks and receive approval from Nasdaq, but the process isn’t something that happens overnight. Nasdaq, like the New York Stock Exchange, considers itself an exclusive club, only interested in companies that will attract investors.
To even be considered, a business must have a set number of publicly-traded shares, market makers, and shareholders.
They must also have a steady revenue. Lots and lots of revenue
MassRoots, the company formed in 2013 Denver, may be the most popular guy in social media circles, but Nasdaq still won’t sit at its lunch table. It attempted to list in May, an attempt that was shot down after the stock exchange labeled MassRoots “aiders and abettors” of substances deemed illegal under Federal law.
Even without this, MassRoots might not be a company Nasdaq welcomes with open arms – it lacks diversified shareholders, for one thing. It also only recently reached the black, after it started to generate its revenue through advertising last year.
With all of this, you might guess that Nasdaq simply isn’t ready for recreational weed; it needs to finish spying out its window and telling the neighborhood kids to get off its lawn. Even so, that doesn’t mean investing in marijuana is akin to owning eight storage units filled with boxes of Google Glass. It has the potential for enormous returns.
A Recession Proof Entity
History shows that recessions happen, some expected and some out of the blue. When the housing market crashed in 2007, many of us experienced hardship firsthand: it knocked us on our Fannie Maes. And headlines in bold told the story: The Worst Economy Since the Great Depression.
Of course, the Great Depression was much worse: it impacted the country to a larger extent and millions of people lost everything. Not
just their homes, but their ability to purchase food and clothing. Many of the social programs in place today simply didn’t exist back then. Sufferers were largely on their own. And, yet, the alcohol industry boomed.
The legal industry didn’t, as Prohibition was still in effect, but underground dealings, purchases, and creation held steady because of one reason:
Alcohol is a recession-proof industry – whisky and rye simply rolls its eyes at financial struggle
This doesn’t insinuate that spending habits don’t at all change: Dom Perignon probably didn’t have a marque year in 2008. But statistics show that, while people spend a less amount on alcohol, they purchase more of it. Economic depressions are, as they imply, depressing, and some people turn to the bottle to ease the anxiety.
Marijuana, it can be argued, possesses a similar resistance to monetary collapse. Even with emptier checkbooks, people continue to purchase things that make them feel better – be it alcohol or cosmetics or new haircuts – and pot has the talent to do just that.
Unless you go the penny stock route, investing in cannabis on a recreational level is something you might have to wait for: don’t worry, it’s coming. In the meantime, several companies tied to medicinal marijuana are worth your time and your dime.
GW Pharmaceuticals has a long track record on Nasdaq. It’s a biotech company with a cannabis-based epilepsy drug. INSYS Therapeutics, while also developing a drug for epilepsy, is better known for its drugs that manage pain in cancer patients.
Cara Therapeutics, a clinical state biopharmaceutical company, develops pain relief drugs with a specific interest in CBD
As the medicinal benefits of CBD are further realized, Cara will likely benefit immensely. And so will its investors.
To Market to Market to Buy a Fattie
Marijuana is an up-and-coming industry, naturally making it a wise investment choice. However, this doesn’t mean there’s no risk. The stock market is, ultimately, a gamble. Sure, not as much as driving to Reno and putting your life savings on Red 19, but it’s a risk nonetheless.
According to Investopedia, there are four main things that make a stock unstable. Including:
The Stock is Getting Too Much Attention: If you know of a hot stock, the entire world probably knows too (unless you’re Martha Stewart). The exaggerated interest in a stock overinflates its value, meaning there’s nowhere to go but down.
The Stock Price is Volatile: A good rule of thumb is if shares are expensive when you buy, they’ll be cheaper when you sell. The same can be said for stocks that teeter up and down. So, stick to those with more constancy.
You’re Emotionally Attached: It sounds funny to think of emotions in regards to Wall Street: you start stalking your stocks and asking to bond. But emotions have no place in this market. Even if you’ve found the best returns in the world, you’ll have to part with your shares at some point.
The Company’s Earnings Decline: Perhaps the biggest thing that makes a stock risky is the company it’s tied to: if the business struggles, so will the stock. Companies bounce back, but there’s no guarantee. There’s probably not too many people who became millionaires because they invested in the Edsel.