Investing In Canadian Cannabis Stocks 2021: Is It A Good Idea?

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The future of cannabis has been in constant flux. With the emergence of scientific evidence proving its efficacy, the popularity of cannabis both as a recreational and medicinal agent is skyrocketing globally. It has led to a wave of legalization taking over the entire world. While cannabis is legal in Canada since 2018, the recent speculations of federal legalization in the US have opened up an abundance of opportunities for investors.

Are you thinking of investing in Canadian cannabis stocks in 2021? ? Do you wonder if it is a wise decision? Dive right in to know everything about investing in Canadian pot stocks.

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Why should you invest in Canadian cannabis stocks in 2021?

Such is the popularity of cannabis that the market is experiencing a steady inflow of established and new companies. There are sizeable consolidation and expansion of the cannabis market, leading to increased players in the industry. Besides that, if you look at the top-performing stocks at the market today, the chances are high that you might find cannabis companies on the list.

Despite the upward trend in the Canadian stock market, most investors are still skeptical about investing in the stocks. If you’re wondering whether investing in Canadian cannabis stocks is a wise decision or not, here are a few compelling reasons for you:  

1.       Legalization:

After Uruguay, Canada is the second country to legalize the use of cannabis. The country became a pioneer when they introduced the Cannabis Act during the year 2018. It allows all adults over the age of 18 to legally purchase and consume cannabis in the country for both recreational and medicinal reasons. The strict framework aims to regulate the use of cannabis to safeguard the youth and displace the illegal cannabis market from the country. Since the legalization, the consumption and trust in cannabis have risen. Both companies and investors have recognized cannabis as a lucrative investment opportunity, contributing to increased cannabis stocks.

When it comes to the neighboring country, the US, cannabis is still not legal on the federal level. While more states are legalizing the herb’s recreational use, the industry has been suffering losses in the last two years. The newly elected Joe Biden and Kamala Harris in the pre-election mentioned decriminalizing pot for the entire country. If it happens anytime soon, the revolutionary move will affect cannabis stocks in the US and revive Canadian stocks.  

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2.       Popularity:

The reach of cannabis is increasing tremendously in Canada. With the legalization of the herb all around the country and the availability of research surrounding the medicinal effects, people are more willing to try cannabis. People are using products of quality brands like Sunday Scaries to transform their lives.

After the country legalized cannabis, 2% of the Canadian population tried it for the first time. While the numbers might look insignificant now, when you calculate the number of people, it comes up to be half a million new users. The emergence of a whole new target audience has also led to more investors who have faith in the market. These numbers will only go up in the near future, making 2021 an ideal time to invest in cannabis stocks.    

 

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3.       Growth opportunities:

While the Canadian cannabis industry is well in the infancy stage, it is showing great growth potential. The US government still hasn’t decided on legalizing recreational cannabis on the federal level. The Canadian cannabis stocks can still enjoy the opportunity to grow significantly in North America and internationally.

Moreover, the cannabis industry is continually evolving. Despite the highs and lows in stock prices, experts predict that cannabis stocks have a bright future in store for them. The cannabis market of Canada can reach CAD 9.2 billionby the year 2025.

4.       Banking industry:

With cannabis occupying the gray area for decades until now, there is a general lack of trust among people and other industries. It was a daunting task for cannabis companies to raise capital for their operations based on the stereotypes associated with it. Canadian banks have been reluctant to lend to or invest in cannabis businesses. It changed in the year 2018 when the Bank of Montreal, one of the top 5 banks of the country, decided to invest in Canopy Growth Corp. The bank bought more than 5 million shares, amounting to the value of $175 million. A few months later, theysigned a deal with another huge cannabis firm Aurora Cannabis Inc valued at $250 million.

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Which cannabis stocks must you invest in?

The cannabis industry in Canada consists of numerous companies that support or directly engage in the production, research, distribution, and sale of the herb. If you’re considering investing in these Canadian stocks, here are a few options for can add to your portfolio:

·       Aurora Cannabis Inc. (NYSE: ACB)

Aurora Cannabis Inc began trading on Toronto Stock Exchange in 2017 and NYSE in 2018. The company deals in dry cannabis and cannabis oil. Aurora has adopted an acquisition strategy by purchasing MedReleaf and Whistler Medical Marijuana Corporation to expand their operations.  

·       Cronos Group Inc. (NASDAQ: CRON)

Unlike other companies, Cronos Group Inc invests in cannabis cultivators or companies in the industry. They have their own line of cannabis products and also regularly invests in other cannabis companies. Currently, their diverse portfolio includes brands like Cove, Peace Naturals, and Lord Jones. Despite the many ups and downs in 2020, the company is gaining 2% year-to-date.

·       Canopy Growth Corp (NYSE: CGC)

Often touted as the first unicorn in the Canadian pot market, Canopy Growth Corp is a well-performing stock. The company produces a range of cannabis products, but the brand ‘Tweed’ is most widely recognized. It is trading on NYSE since 2018, and the stock was up by 17% last year.

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Final thoughts

If you look back on the last decade, the buzzword that dominated the world was cannabis. The herb has managed to garner widespread acceptance, which leads to lucrative opportunities for investors. If you haven’t already invested in Canadian cannabis stocks, now is the right time to do so!

Reference links:

https://www.greedyrates.ca/blog/should-you-invest-in-marijuana-stocks/
https://www.valuethemarkets.com/2020/12/12/cannabis-investing-us-vs-canada-which-pot-stocks-are-best/

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