Guide on How to Invest in Canadian Legal Cannabis Industry

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The legalization of Canada’s cannabis industry has changed a lot in the Canadian and world markets. Unlike their southern neighbors, Canadians legalized marijuana on the federal level. Before the Access to Cannabis for Medical Purposes Regulations (ACMPR) implemented in 2016, there were MMPR and MMAR acts with the latter dating as far bar as in 2001. The government has had a lot of time to find the best solutions and secure the companies, and maybe that’s why it’s estimated that the Canadian cannabis industry can reach $22.6 billion in annual revenue which is more than all spirits industries combined. This also means plenty of new opportunities for new and experienced investors. What are some of the best ways to invest in the Canadian legal cannabis market?

How can you invest?

1. Buy stocks of cannabis companies

This is probably the most obvious way to invest in any kind of industry. Cannabis companies will include all companies that get most of their revenue from the marijuana industry. This can be especially profitable if the world markets will keep opening; because Canada has legalized cannabis on the federal level, it has become the perfect choice for a business partner in those countries where it’s not entirely legal or where the industry is only crawling.

2. Buy stocks of companies that have ties to cannabis companies

The truth is that the cannabis industry still isn’t the most stable market to invest in and it probably won’t be very safe for investors for some time. Plus, marijuana continues to be a controversial topic and not everyone wants to have it in their investment portfolio. For those people who aren’t willing to take so much risk, the better option would be to find a company that’s somehow tied to the cannabis industry but is not present in it directly. For example, there are some cosmetics or alcoholic brands that invest in the canopy and cannabis-based products, but their overall product range is much wider than that.

3. Buy exchange-traded funds (ETFs)

ETFs give you an opportunity to buy a variety of cannabis stocks; you don’t have to choose only one company and their specific shares. It allows you to limit the risks that are always involved when you’re investing your money with the hope of profit. The disadvantage is that when you buy ETFs, you need to pay an annual fee which is not the case with individual stocks. 

What are some of the best stocks to buy?

Since the day of the legalization, more and more companies have been popping up on the market, but there are some large producers that are particularly noteworthy when it comes to buying stocks:

  • Aurora Cannabis Inc.
  • Canopy Growth Corp.
  • Supreme Pharmaceuticals Inc.
  • Aphria Inc.
  • CanniMed Therapeutics Inc. 
  • Mettrum Health Corp.
  • Organigram Holdings Inc.
  • Emblem Corp.

Apart from that, a large part of the cannabis industry is constituted by testing labs, security firms and manufacturers of cannabis-based products, not cannabis itself which can be a great option if you don’t want to mix up with marijuana directly. 

Risks to consider

Cannabis is an especially tricky industry, mostly because it has been illegal for tens of years. The situation has started to change only recently, but it still needs time and regulations to be stable and secure, and who knows how fast the world market will be changing. For example, the banks may have begun to open for servicing large cannabis companies, but smaller players can still encounter obstacles. 

One of the biggest worries concerning the Canadian marijuana industry is the risk of an excess of supply in relation to demand. All growers have increased their production capacity to be ready for the big opening of the recreational market, but, according to numbers, five of the biggest companies are now capable to meet all the markets’ needs, so it may be extremely hard for smaller businesses to start and make a profit.

If it’s really the case and the supply exceeds the demand, the prices will most likely fall which will make it impossible for small companies to stay in business.

Where is it heading?

The Canadian marijuana market will certainly continue to grow, probably quite rapidly, but a great part of it is likely to focus on foreign markets, as many Canadian producers are already working with companies from Europe, Australia and South America. For example, apart from Northern American countries, the biggest and the most important country in the cannabis market is Germany. They have legalized marijuana in 2017 and have been a prominent partner of Canadian cannabis producers ever since. 

What’s more, over 30 states in the USA have already legalized the medicinal use of marijuana, and more than 10 – the recreational use. It’s already the fastest-growing cannabis market in the world, and the number will only increase in the near future. As for now, Canadian companies cannot provide Americans with cannabis or cannabis-based products, as it’s not legal on the federal level there, but the major changes may be on their way.

The bottom line

The cannabis industry is one of the fastest-growing markets in Canada. It’s important to know the risks and research all possible options, but it doesn’t mean that investing in marijuana is a bad idea. On the contrary, despite temporary obstacles, the situation will only improve as more and more countries are likely to legalize the use of cannabis. It may be beneficial to find your place in it right now.

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