Late last year, Canada joined Uruguay as the second major country to legalize marijuana. Since then, the cannabis wave has been taking over the world with medical marijuana companies popping up like mushrooms. The industry is growing at a fast pace and demand is not relenting. To be sure, statistics show that the cannabis industry expanded to $10.4 billion by December 2018, and it employed close to quarter a million people, according to a senior economist at New Frontier Data.
Interestingly, economists further added that investor activity in medical marijuana stocks in North America during the year was exceptional. Notably, investors poured over $10 billion into the stocks in 2018 alone. This is quite interesting, especially if compared to the $5 billion that was invested in the stocks in the three years leading to the end of 2017. This year, analysts estimate that the investors will splash $6 billion more than 2018 and that the upward trend might continue for at least three years ahead.
The prospect of the industry expanding further rests on the enthusiasm by US lawmakers to push for federal legalization of the industry. Only the State of California has comprehensive regulations that govern the sale and use of medical and recreational marijuana.
Following the favorable statistics and the huge amounts of money thrown around in the cannabis industry, a general fear of missing out (FOMO) is building among potential investors. And the FOMO could be justified if one considers a market report by Grand View Research. Notably, the report concluded that by the end of 2025, the global legal marijuana industry will be worth $146.4 billion. Like discussed earlier, the rapid expansion will be fueled by a possible nation-wide cannabis legalization in the US. Furthermore, there is a growing body of evidence that links marijuana to the healing of certain diseases like cancer, relieving of chronic pain, and treating certain mental disorders.
From the foregoing, here are some reasons why you should consider dipping some money into medical marijuana stocks.
Huge potential for growth
Citing the statistics presented earlier in this article, there is a huge potential for growth on the horizon for medical marijuana stocks alongside those that deal with recreational marijuana. Additionally, the likelihood of the US legalizing both medical and recreational marijuana in all states signifies more room for growth. To be sure, the US hinted at this direction last year when legislators passed the 2018 Farm Bill. In particular, the bill lays down the legal framework for cultivating and processing Hemp for the sake of extraction of cannabis for medical use. Also, if the US proceeds with the blanket legalization of the substance, the odds for global legalization will be higher.
Expanding demand for cannabis products
Medical marijuana companies rely on the demand for cannabis products to generate revenue. Therefore, it’s obvious that an increase in demand for the products by any amount will lead to a proportional increase in supply. Obviously, the increased supply for cannabis products basically implies a higher level of demand for cultivated raw materials. In essence, the higher demand is set to trigger a cross-industry growth in revenue and market size.
If the cannabis sector was worth $10.4 billion last year and analysts expect it to grow to over $140 billion by the end of 2025, then this could be the best time to buy. As per the laws of demand and supply, prices are low when demand is low. At the moment, demand for the stocks is low since there is a lot of uncertainty in terms of regulations and general direction of the industry. This is to say that once these issues are settled, more money will pour into the industry and soon, the stocks will be too hot to touch.
At the beginning of every industry, there is a lot of confusion in terms of future direction. Usually, and rightly so, investors are cautious and keep alert for any signs of a bubble which could unexpectedly burst in their face. Undoubtedly, there is no investor who would wish to lose their hard earned capital through an unworthy course. Nevertheless, this is the time investors should dedicate more resources to the understanding of the dynamics of the cannabis industry. Due diligence at this time will ensure that one does not throw away money into a bottomless pit, or it could enable the investor to take advantage of the early bird strategy which might lead to millions in earnings. Whatever tactic one chooses, there is the chance of losing out or cashing in.