Pot Stocks Rally as CBD Goes Mainstream
This is individual research and does not constitute investment advice.
Have pot stocks gone up too much… or is there still room to run?
In just a few weeks, recreational cannabis sales will go live in Canada.
This is an enormous moment for the industry.
This not only marks the end of nearly a century of prohibition in Canada, but also makes the country the first G-7 member to legalize adult-use of cannabis nationwide.
As this milestone rapidly approaches, the cannabis markets are blazing.
The North American Marijuana Index is on fire…
Since August 14, the index has skyrocketed a staggering 53.4%!
Though that’s small potatoes compared with the performances of some individual cannabis companies.
Take the Canadian producer Tilray (Nasdaq: TLRY) for instance. I profiled this company here in the days before its recent initial public offering.
In that time, shares have skyrocketed… and collapsed…
Tilray’s market cap is now $10.4 billion. And its most recent 29% one-day move was fueled by what is expected to be the fastest growing segment for pot stocks in the years ahead.
Tilray received approval from the Drug Enforcement Administration to import cannabis to the U.S. in capsule form for a clinical study to treat essential tremor, a nervous system disorder. The company’s capsules will contain cannabidiol (CBD) and tetrahydrocannabinol (THC).
I have stressed time and again that investors should ignore the dried flower market and focus on extracts, oils and concentrates.
We’ve already seen that Constellation Brands (NYSE: STZ), Diageo (NYSE: DEO), Molson-Coors (NYSE: TAP) and even Coca-Cola (NYSE: KO) are dropping billions or looking to get into the cannabis-infused beverage space because of the potential of concentrates.
But now it’s the medicinal side – not the recreational side – that appears poised to have the biggest upside. And that’s all thanks to CBD – the nonpsychoactive ingredient in cannabis with an ever-increasing range of medical applications…
Not to mention, companies involved with CBD, like Tilray, are having a great year.
Since its lows in April, shares of GW Pharmaceuticals (Nasdaq: GWPH) have risen more than 40%. That may not seem like much compared with some of the meteoric rises in the sector. But the company was the first ever to receive FDA approval for a CBD treatment, its epilepsy drug Epidiolex.
That’s a significant milestone.
Meanwhile, hemp-based CBD drugmaker CV Sciences (OTC: CVSI) is having an even more impressive 2018. Shares have risen more than 733% this year!
But even that performance could be dwarfed by the CBD market’s growth itself.
For years, CBD products were largely available only in head shops or by prescription from a handful of doctors. That’s rapidly changed though.
CBD has moved beyond the dispensary. You can now buy it in health food stores, coffee shops, pet stores and hotel minibars. You’ll even find CBD in beauty products.
The move from the dispensary to the grocery aisle is expected to lead to eye-popping growth.
According to the Brightfield Group, the U.S. CBD market is currently around $600 million. But this is just the beginning.
That’s nearly a fortyfold increase in just four short years.
CBD has been accepted by the general public. If you don’t believe me, try finding a seat at a local senior living facility or retirement community gathering when there’s a presentation on CBD.
There may be no hotter cannabis sector over the next several years.
That’s why investors should be looking to pack their portfolio with some CBD companies. Because even if the growth is half what Brightfield expects, that’s still tremendous upside.