Finance

Tips for cannabis investing to stay ahead of the risks

Investors have different financial goals and risk tolerances. Conservative investors probably won't be tempted by most cannabis stocks because of their high-risk levels and volatility. However, aggressive investors might be comfortable buying some cannabis stocks. There are a few important notes anyone interested in the industry should know before investing in cannabis companies.

To understand the risks associated with cannabis stocks, it’s important to first know the details about cannabis and the cannabis industry. These tips for cannabis investing will help you stay ahead of the market.

You can also stay on top of market news through the Hemp.im app. This app collects the latest cannabis investing news in bite-sized chunks that are easy to digest.

Cannabis investing can create a lot of profit

You may have heard of entrepreneurs or investors who have made lots of money from the cannabis industry.

Investors may believe that legalizing cannabis for recreational purposes will lead to increased consumption of this product and create profitable investment opportunities.

However, the cannabis industry is new and could change considerably in the coming years. It is therefore not certain that all companies operating in this sector will be profitable. Some will do well, whilst others will shut down.

The risks of cannabis investing

Cannabis-related companies that solicit investors to finance their activities grow cannabis or develop services, products, and technologies in support of the industry.

Examples include irrigation, ventilation and lighting systems, product packaging, and smokers’ items.

New companies could enter the cannabis market and compete with existing companies. Increased competition could reduce the profits of the cannabis company in which you are considering investing.

In addition, a black market that offers lower prices to cannabis users could affect the profitability of legitimate companies that grow cannabis.

Moreover, the sale of cannabis for recreational purposes is restricted and may be regulated differently from one place to another. The need to comply with these rules may slow the growth of some companies.

Cannabis use remains illegal in several countries, which may also limit the growth of companies in the legal cannabis sector.

Do your research before you start cannabis investing

Investing in cannabis comes with a variety of risks that are important to know before starting. (Source)

Investing in the cannabis industry needs time and energy. Unlike sectors where companies have been established for a long time, the cannabis industry shares little financial information and has little historical data.

Before investing in a company in the cannabis industry, research is needed:

  • Learn more about the cannabis industry
  • Read the prospectus or offering memorandum that provides information about the company, its management, its activities and the risks that could affect its profitability
  • Take the time to understand the company’s business plan, how its revenues will be generated and how long it will take for the company to be profitable
  • Make sure that the company that wishes to sell cannabis for recreational purposes has an agreement with the Quebec Cannabis Society or other organizations in another Canadian province mandated to sell cannabis at the retail level
  • Will the company need to obtain more financing to build or improve its facilities? Will it issue other securities? If so, the value of your investment may decline

Cannabis stocks with the most potential

Here are the cannabis stocks with the highest revenue growth for the most recent quarter.

Rising sales show that a company’s business is growing and is generating more money than it can use to cover costs, and reinvest in the business:

  • Valens GroWorks Corp. is a Canadian biotechnology company that specializes in cannabis processing and formulation, including analytical testing
  • Harvest Health & Recreation Inc. is a medical cannabis company specializing in cultivation, dispensaries, and production facilities
  • GW Pharmaceuticals Plc. is a biopharmaceutical company headquartered in the United Kingdom. The company discovers, develops, and commercializes novel therapeutics, including cannabinoid prescription medicines for the treatment of cancer pain, Multiple Sclerosis, and neuropathic pain

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(Featured image by sallyjermain via Pixabay)

DISCLAIMER: This article was written by a third party contributor and does not reflect the opinion of Hemp.im, its management, staff or its associates. Please review our disclaimer for more information.

This article may include forward-looking statements. These forward-looking statements generally are identified by the words “believe,” “project,” “estimate,” “become,” “plan,” “will,” and similar expressions. These forward-looking statements involve known and unknown risks as well as uncertainties, including those discussed in the following cautionary statements and elsewhere in this article and on this site. Although the Company may believe that its expectations are based on reasonable assumptions, the actual results that the Company may achieve may differ materially from any forward-looking statements, which reflect the opinions of the management of the Company only as of the date hereof. Additionally, please make sure to read these important disclosures.

First published in Autorite De Marches Financiers, a third-party contributor translated and adapted the article from the original. In case of discrepancy, the original will prevail.

Although we made reasonable efforts to provide accurate translations, some parts may be incorrect. Hemp.im assumes no responsibility for errors, omissions or ambiguities in the translations provided on this website. Any person or entity relying on translated content does so at their own risk. Hemp.im is not responsible for losses caused by such reliance on the accuracy or reliability of translated information. If you wish to report an error or inaccuracy in the translation, we encourage you to contact us.

Michael Jermaine Cards

Michael Jermaine Cards is a business executive and a financial journalist, with a focus on IT, innovation and transportation, as well as crypto and AI. He writes about robotics, automation, deep learning, multimodal transit, among others. He updates his readers on the latest market developments, tech and CBD stocks, and even the commodities industry. He does management consulting parallel to his writing, and has been based in Singapore for the past 15 years.

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