Cannabis is a hot ticket in the investing community at the moment, and for good reason. Recent regulatory changes have made recreational use of cannabis among adults legal in Canada and the manufacture and sale of CBD legal in the United States.
These regulatory changes have led to the emergence of an entirely new market. One that is bound to make plenty of millionaires. Nonetheless, as with any investment, investing in the wrong cannabis stocks can be risky. Here are a few tips to help you make the right choices.
Tip #1: Invest In Cannabis Stocks That Are Consistently Releasing News
It seems like breaking cannabis stock news is a daily occurance. Reading the news, I’ve come to realize that there are a select group of cannabis companies that seem to take the majority of the limelight. Moreover, these are the companies that seem to be performing best.
With that said, when you get started, take a look at the more well-known cannabis companies that are releasing all of the news. After all, these releases have been about progress in markets around the world. Those making the most progress now, while the cannabis sector is emerging, are the companies that are likely to take the lion’s share of the market in the future.
Tip #2: Look For Companies That Have Already Laid A Strong Foundation
A while before we started hearing about legal cannabis in Canada and legal CBD in the United States, medical cannabis was legal in Canada and many states within the Union. These companies laid the groundwork early on, and therefore, have a strong foundation for growth now.
So, when investing in the cannabis space, look for companies like these. The stocks that represent businesses that already have products on the market, growing facilities, and a detailed understanding of the space are the ones that will likely be the biggest profit makers in the long run.
Tip #3: Consider Cannabis-Related Biotechnology Companies
Cannabis isn’t just a recreational drug. The truth of the matter is that there have been several studies that prove the efficacy of the plant in the treatment of various ailments. As a result, biotechnology and pharmaceutical companies have been latching onto the medical benefits of cannabis for some time.
Some of these companies already have products in clinical trials and on their way to the FDA for new drug applications. While recreational cannabis is likely to be a massive market, there are few investments that pay off like those in blockbuster medications before they were regulatory approved. The cannabis sector is likely going to lead to several of these opportunities.
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Tip #4: Take A Look At Financial Strength
This one isn’t just for cannabis stocks. Before making an investment in any stock, you should always look into the balance sheet. After all, you want your investment to pay off in the long run. So, if the company only has enough money to survive for a few months, that’s going to be a bad move.
Dig into the balance sheet, paying special attention to assets owned and liabilities. Also take a look at revenue and the cost of goods sold. This will tell you more about the company’s profitability to date and what to expect moving forward.
Tip #5: Invest In Cannabis Stocks That Represent Strong Brands
Finally, a brand is worth a thousand words, but a good brand is worth billions! There are several cannabis companies out there that have created brands that are becoming leaders early on. Since consumers like to pick a brand and latch onto that brand when buying products, choosing investments with the consideration of the strength of the company’s brand is a good idea.
There you have it. If you’re going to get into the world of cannabis investing, keep these tips in mind to help increase your chances of making profitable decisions. If you’d like a head start on your picks, check out my 5 favorite stocks in the cannabis and CBD market on Benzinga!