What a change a few decades can make, right?
Cannabis, weed, marijuana, ganga, pot, green, smoke – whatever you want to call it – has gone through what can only be described as an almost unbelievable transformation in the past 20 or so years. Gone are the days when cannabis was simply seen as the indulgence of choice for hippies and stoners. Long gone indeed.
Today, with so many countries across the globe legalizing cannabis for medicinal and recreational purposes (and many more on the horizon), the legal cannabis industry has become one of the most talked-about markets in the world and one with some of the best opportunities for investors. This ‘green rush’ has a seemingly exponential possibility for growth, with the USA and Canada leading this global charge.
The worldwide legal marijuana market reached an astonishing US$ 26.5 Billion in 2023, with some pundits expecting that number to top US$ 140 Billion by 2032. That would equate to a growth rate of over 20%, which does sound like a lot, but when you consider that some of the biggest players in this market have achieved growth rates well in excess of 100%, it becomes increasingly clear why so many are clamouring to get involved.
The lush landscape that is the modern North American cannabis industry presents an intriguing realm for those with a bold investment spirit.
But…
Is legal marijuana at a point where it is safe for cannabis investors to consider it a viable place to park their money?
How do the potential upcoming changes in both state and federal marijuana laws affect the future of cannabis investments?
Are there any popular, well-supported cannabis stocks and ETFs that investors should consider?
What the potential pitfalls that investors should be aware of before diving in?
Let’s find out…
Introduction to the Cannabis Market
The global cannabis market’s growth trajectory is scaling new heights and is projected to soar to monumental figures by 2030, as reported by IMARC. This meteoric rise is anchored by a trifecta of key factors: – legalization initiatives, the increasingly important and scientifically understood role of medical cannabis, and the rising groundswell of public and political support for the current and ongoing changes.
In particular, the lush landscape that is the North American marijuana industry has emerged as the true epicentre of cannabis investing excellence, and it’s not hard to work out why. The US and Canada rapidly positioned themselves as the twin titans thanks to their early adoption of cannabis-friendly legislation, an already thriving industry backbone, and a level of public support that made it very hard for the political class to ignore.
But with there being so many decades of heavy stigmatization, prohibition, and a host of persistent negative stereotypes associated with cannabis consumption, the long-time ‘bad girl of the herb world’ can be seen as something of a black sheep in the legal investing landscape.
The north american legal and regulatory landscape
Within the US itself, the patchwork quilt of state-level legalizations continues to expand, stitching a larger tapestry for the market. Of course, this ‘mish-mash’ of regulations has, in many instances, brought with it an undeniable level of uncertainty and confusion, especially for those among us looking to invest.
Thankfully, their does seem to be a shift happening in the upper levels of the federal government in the USA, and the sooner this happens, the sooner potential cannabis investors can put this potential barrier to the side.
Of course, the US isn’t alone, as our friends to the north in Canada are also opening up a wealth of opportunities in this market. By legalizing recreational cannabis in 2018, Canada has paved the way for a thriving industry that is continuing to grow and expand. Political support is strong, with new legislation being proposed to clear the way for even more growth in this market.
Germany, Thailand, Malta, South Africa, Luxembourg, Georgia, Uruguay, Mexico, and even one state in Australia have all followed suit, only strengthening the market and proving that this is not a fad but a global movement.
The “pot”ential for investors
At this point, the potential for cannabis investments is simply undeniable.
The market is well-regulated, it is growing at an unprecedented rate, and the overwhelming consensus is that this growth isn’t going to slow anytime soon
There are also a host of different way for investors to get involved, from individual stocks and ETFs to private equity firms and venture capital. On top of all that, potential ancillary businesses such as technology and software, real estate, security and much more present some golden opportunities for investors, old and new, to enter a new market and a new era.
Investing in Ancillary Cannabis Businesses
Moving just beyond the frontlines of cultivation and distribution is where you’ll encounter the backbone of the cannabis market – ancillary businesses. These entities and businesses help prop up the primary medical marijuana and recreational cannabis industries with essential services, but do so while sidestepping the regulatory limelight that often accompanies direct handling and distribution of the plant.
So, what are the most promising supporting businesses that investors should be considering in the current landscape?
Technology and software
With the world moving toward a more digital and automated existence, it’s no surprise that the tech and software industries are becoming increasingly entwined with the cannabis market. From seed-to-sale tracking systems to point-of-sale platforms, AI systems to help monitor and track (and even optimize) both plant growth/health but also security and compliance, and even delivery apps for the end consumer – there’s no shortage of potential in this sector.
Some of the current leaders in this space include:
LeafLink – an online marketplace for wholesale cannabis products.
Flowhub – a point-of-sale and inventory management platform.
Jane Technologies – an e-commerce platform connecting dispensaries with customers.
Metrc – a seed-to-sale tracking system used by large-scale commercial cultivators to help maintain accurate records of their inventory, sales, and compliance with regulations.
Leafly – a popular online platform for learning about different cannabis strains and products.
Tymber – a technology platform providing analytics and insights for the cannabis industry.
Real estate investment trusts (Reits)
As the industry grows, so does the need for physical spaces to cultivate, process, and sell cannabis. Real estate investment trusts (REITs) offer a unique opportunity for investors to get involved in this aspect of the market without directly handling or distributing cannabis products.
While the rules and regs surrounding REITs can be quite complex, some of the key players in this space include:
Innovative Industrial Properties – the first REIT focused on acquiring and leasing cannabis-related real estate. By concentrating on high-quality tenants and strategic property acquisitions, they have established themselves as a key provider of essential infrastructure for the ever-expanding cannabis industry.
AFC Gamma (AFCG) – A long-term real estate investment company that provides debt and credit facilities to US cannabis operators. Earnings have been strong, and the company has set itself apart from its competitors by providing a rang of credit facilities, rather than just one type.
NewLake Capital Partners (NLCP) – another real estate investment company that acquires and leases properties to state-licensed cannabis operations. NLCP focuses on multi-state operators (MSOs), which allows them to diversify their ris and build a solid portfolio of cannabis-related properties.
Logistics and supply chain
All sectors need reliable and efficient logistics and supply chain management in order to succeed, and the cannabis industry is no different. As the market expands, so does the need for effective transportation, warehousing, packaging, distribution, and delivery services. The sensitive nature of the product, combined with strict regulatory compliance requirements, makes this an industry ripe with opportunities for logistics and supply chain businesses – as long as they are able to navigate the complex regulatory landscape.
Some of the most prominent players in this space include:
KushCo Holdings – provides packaging, supply chain management, and other ancillary services to the cannabis industry.
Grow Pack – a contract manufacturing and packaging company specializing in cannabis-infused products.
Security and compliance
With heavy regulations surrounding the production and sale of cannabis, security and compliance are unsurprisingly top priorities for producers and distributors.
This presents a major opportunity for security companies that specialize in securing cannabis facilities, transportation, and other aspects of the supply chain. Additionally, there is a growing need for compliance software to help businesses stay on top of ever-changing regulations.
Popular Marijuana Stocks
With the meteoric rise of the legal cannabis industry, it’s obvious why savvy investors are flocking to the market. Ancillary businesses are a great option for those looking for slightly more security, thanks to the ‘hands-off’ nature of many of these companies. But for those willing to take on just a little extra risk, there are also plenty of direct cannabis-related stocks to consider.
And, in all honesty, the market is only becoming more secure. We are now going on 6 years since California reclassified cannabis and more than 11 years since Washington and Colorado legalized recreational use.
The current best options to look at include:
Tilray brands (Tlry):
Tilray Brands is one of the largest international cannabis companies, having operations in Canada, Europe, the UK, Australia, and several other countries. With a focus on medical marijuana products as well as recreational use, Tilray Brands has an impressive portfolio of globally recognized brands.
In 2018, they became the first cannabis company to go public on the NASDAQ and have since expanded their reach through strategic partnerships and acquisitions.
Cresco labs (Crlbf):
A colossus among U.S. cannabis companies, Cresco Labs has operations in 11 states, making it one of the country’s largest multi-state operators (MSOs). Its diverse portfolio of brands and products includes edibles, vaporizers, tinctures, and topical creams. In addition to its vertically integrated operations, Cresco Labs has also been making strategic acquisitions and partnerships to expand its reach in the ever-growing cannabis market.
Green thumb industries (Gti):
With a 2023 fourth-quarter revenue of $278 million, which was an increase of 7% year-over-year, Green Thumb Industries is another major player in the U.S. cannabis market. Based in Chicago, Illinois, they have operations in 12 states and own a portfolio of well-known brands such as Rhythm and Dogwalkers.
Green Thumb Industries has also been actively acquiring new licenses to expand its presence and recently announced its plans to enter the European market through a partnership with one of Germany’s leading distributors.
Verano holdings (Vrnof):
With 14 cultivation and production facilities and 140 operational retail locations, Verano Holdings is one of the largest cannabis companies in the U.S.
They also have a strong presence in Puerto Rico and operate under well-known brands such as Zen Leaf, MÜV, and Strainwise. In addition to its impressive reach, Verano Holdings has also been actively acquiring new licenses and expanding its operations into emerging markets.
Conclusion
While the current state of federal legalization and legislation remains uncertain (although there is great hope and progress being made in this area), both the medical marijuana and recreational cannabis industries are showing no signs of slowing down.
Each year, more and more states (and countries outside of the USA) join the march towards full cannabis legalization. With this growth, the industry’s ancillary businesses are also seeing increased opportunities for success and expansion.
As with any investment, it is important to do thorough research and consult with a financial advisor before making any decisions. But, for those interested in investing in the cannabis space, there are a bunch of promising opportunities out there for both ancillary and direct cannabis-related businesses.
With the right strategy and approach, investing in the cannabis industry can bring lucrativ returns in the long run. And with the industry’s continued growth and evolution, it is vital to keep up to date with industry movements and trends to make informed investment decisions. Don’t worry, though; here at The Herb Lifestyle, we have got you covered.
Reach out and cultivate your success in the thriving field of cannabis investments today.
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