In 2018, cannabis stock was considered a hot commodity. The market had received a significant boost with recreational marijuana legalized in California. It was the introduction of a vast market, and it seemed as if weed stock would go the same way as Bitcoin. Countless investors got involved in the belief they were on to a ‘sure thing.’
Of course, there is no such thing as a certainty in the markets, and countless people suffered as a severe downturn gripped the industry.
What happened? As is often the case, it wasn’t a single issue that caused the crash. However, one of the most significant problems related to a shortage of supply. Too many growers, especially in Canada, waited far too long to expand. Other issues included growing and processing backlogs, high tax rates, and a significant delay in the launch of the derivatives market.
When you add various regulatory and accounting problems, it seems obvious in hindsight that the market would correct itself.
While 2019 was a bad year, 2020 hasn’t been a great deal better. Many cannabis companies are now on the brink due to cash flow problems. The growing level of competition as more markets open has only exacerbated the issue. The truth is, a significant proportion of marijuana organisations have poor financials.
Is the cannabidiol industry likely to fare any better? It is much easier to find a product like CBD capsules than pre-rolled joints, for example. While cannabis legalization hasn’t extended beyond Uruguay and North America to any great extent, cannabidiol is more widely available. What does this mean for those interested in investing in CBD?
Are CBD Investments a Wise Idea?
Before you consider investing in CBD, please note that, like all other stock market investments, it carries inherent risks. There is a chance that you could lose some, or even all, of your money. Therefore, consider the following before proceeding:
- Your risk tolerance.
- The length of time you intend to invest for. When do you plan to pull out your investment?
- Where it fits in your current portfolio.
- Your financial goals.
Younger investors tend to take more significant risks. They are more likely to look at cannabis and CBD investments than those approaching retirement. Such investors often actively seek volatile industries in the hope that they strike gold akin to Bitcoin.
A Bullish Market?
In stock market parlance, the terms ‘bull’ and ‘bear’ describe market conditions. Bullish conditions occur when a market is rising, and economic conditions are stable. In contrast, a bearish market occurs when an economy is on the downturn, and stock prices fall.
Some investors take the risk of investing in a bear market in the belief that stock is under-priced and therefore provides value. Likewise, putting your money into a bearish market too late means you end up with overpriced stock. This is precisely what happened to marijuana investors who got involved right at the peak of the market.
At present, one could make the argument that now is an excellent time to invest in CBD. The FDA’s refusal to approve the cannabinoid has prevented the market from expanding to its full potential. It has also ensured that very few CBD companies are willing to go public in the United States.
However, CBD is widely available in many European countries. In the UK, for example, there is far less confusion over legality than in America. Consumers can purchase online from reputable companies like Provacan, or check out what a physical store offers.
Full legalization in the United States would indeed give the market a considerable boost. However, there are plenty of European companies worth looking at if you’re interested in CBD investment. Again though, there is a lack of options at present.
Are There Any Worthwhile CBD Investments?
The following companies are available for those interested in investing in CBD:
- Charlotte’s Web Holdings
- CV Sciences
- GW Pharmaceuticals
One of these companies is not like the others. As the name suggests, GW Pharmaceuticals is involved in Big Pharma. It created Epidiolex, a drug that contains CBD, which is FDA approved. It enjoyed a steady rise from 2016 until 2019, where it reached a share price of $177. However, it fell significantly and was worth just $75 in March 2020. It then recovered to around $137 before quickly falling to $100.
The value of Charlotte’s Web Holdings suffered a precipitous decline since August 2019 when it was worth over $21 a share. It plummeted and had lost almost 70% of its value by the end of that year. It has continued to fall, and you can now buy shares for under $3 at the time of writing.
Most CBD investments have suffered this fate. You have to decide if it is a trend likely to continue, or whether the price of such stock will rise again.