Since therapeutic cannabis has made its appearance and this activity has developed worldwide with changes in its legalisation it has become possible for individuals to invest in this activity sector which can be highly advantageous. Through this article we will explain how you can invest in cannabis on the stock markets and trade in this sector online.
Good reasons to invest in cannabis on the stock markets:
Firstly, maybe you are wondering why an investment in the marijuana sector may be advantageous. Here we will explain the reasons why we recommend you trade in this asset as soon as possible.
It should first be noted that the general public is increasingly acceptant of cannabis and the image of what was considered a purely recreational drug has changed over time. In fact, a growing number of governments are deciding to legalise cannabis in their country, primarily for therapeutic reasons but also recreational purposes in some cases with specific rules of course. These ongoing changes in the cannabis sector are of course highly promising for the future growth in this industry and the marijuana sector has never looked as promising or advantageous.
If for example we base our forecasts on recent research completed relating to this market, notably that concerning the cannabis industry in the United States, we note that this could generate over 75 billion dollars in the coming decade, between now and 2030. These highly encouraging forecasts are supported by the growing interest of investors in this asset as more people are tempted to benefit from the rising trend in this specific market by investing, for example, in shares from companies that operate within this sector.
Trading in cannabis using CFDs: A summary of the advantages.
The best way to invest in cannabis now is still considered by many to be trading through an online broker that offers CFDs or Contracts for the Difference. Using these contracts you do not actually buy shares in these companies but simply speculate on movements in the share price. Your profit or loss will be based on the difference between the share price at which you opened your position and the price when you closed your position. Here we offer you the opportunity to learn more about the numerous advantages of this type of investment in cannabis on the stock markets.
- Firstly, CFDs enable you to speculate not only on the rise in the share price of an asset such as cannabis but also on the fall. You can thereby profit from all the market trends by speculating on buying or selling.
- You will also not be required to pay brokers fees as you are not actually purchasing or selling the cannabis shares, simply speculating on their price movements. The only fees that you will be charged are the spreads that that are based on the difference between the selling and buying price of your position and the real price of the asset concerned.
- Advanced analyses and numerous tools to assist in your decisions are also available on the online CFD trading platforms. In this way you can complete pertinent and comprehensive analyses of each share using customisable charts where you can display the indicators you choose or through various targeted economical news and events that will enable you to implement a strategy based on a technical analysis and a fundamental analysis.
- These platforms also enable you to manage your positions without the need to concentrate on the market permanently through the use of automatic orders and other tools such as automatic trading and social trading.
- Many brokers also offer you the opportunity to practise and learn using a free demonstration account under real market conditions so you do not have to invest your capital until you feel entirely ready to do so.
- Finally, using CFDs, you have the opportunity to use a leverage effect which will enable you to increase your profits with a weaker price difference (but which also exposes you to a higher loss risk as well).
Which assets can you invest in with the cannabis sector?
Let us now pass on to some explanations regarding the assets you can speculate on when investing in cannabis. The best way of succeeding in this type of investment is trading in shares issued by the companies in this activity sector. This could be a company specialised in the production of cannabis, biotech companies that use cannabis in the manufacturing of their products or tobacco products and drinks suppliers that use this type of natural commodity.
These assets represent an excellent opportunity as they demonstrate a high volatility and movements that are often clear and long lasting with a succession of clearly identifiable rising and falling trends.
We can however differentiate between companies in the therapeutic cannabis sector and those in the recreational cannabis sector. The biotechs in particular are specialised in the therapeutic sector and are perfecting cannabis based treatments that can then, according to legislation, be prescribed for the treatment of certain pain generating illnesses and health problems. One of the advantages of speculating on the share price of these biotech companies is that they often benefit from the effects of announcements made regarding their success in trials or when they obtain authorisation to launch their products on the market. It is therefore possible to take position on these assets by basing your actions on a fundamental analysis and therefore on news and events. The movements are often particularly volatile and therefore offer the possibility of significant differences in the share price which can be highly profitable with numerous opportunities.
For an investment over the longer term we would favour assets from cannabis producing companies that have experienced a stable and reliable growth at present due to a significant increase in demand.
How to analyse movements in the cannabis share price:
To invest effectively in these assets it is of course necessary to thoroughly understand how the cannabis market operates and thereby be able to understand the factors that can influence it. When completing a fundamental analysis on these assets you should therefore favour the following factors that are the most influential:
- Changes in regulations: As indicated previously, cannabis is currently becoming legal to use in an increasing number of American states and countries around the world, 43 American states at the last count plus Canada. These countries are in fact those that have generated the most trade in the cannabis sector recently. As it is probable that this sector will experience a continued increase in growth as the legalisation of cannabis spreads worldwide this will have a positive effect on companies share prices in this sector. Of course if a country then decides to reverse its decision and forbid the use of cannabis then this will of course have the opposite effect.
- The difference between supply and demand: As with any asset supply and demand also influence cannabis share prices. We know for example that public demand and that of investors is increasing as is also the number of suppliers. It is therefore possible that supply will manage to satisfy demand and even surpass it over the long term.
- Market events and specialised companies: Finally, it is also important to base our analyses on the events in this activity sector and news and announcements relating to the companies concerned such as their financial results, an expansion in operations and any changes in management.
Some shares to think about for investing in cannabis:
You then simply need to choose the type of assets in which you wish to concentrate your investments. Here are a few examples of companies in different sectors of the cannabis industry that you may invest in at present:
- Canopy Growth Corporation, one of the major cannabis producers worldwide as well as one of the most profitable with high performances.
- CRON, or the Cronus Group that works with the Altria cigarette manufacturer which enables this company to boost its growth.
- Tilray, which is one of the best performing companies on the stock markets with an increase of over 800% recorded in 40 days with regular interesting consolidation periods.
- ETFMG Alternative Harvest ETF, which as an ETF enables a lessening of risk.
- Neptune Wellness Solutions, a biotechnology company that is notably specialised in therapeutic cannabis, also one of the only companies in this sector that resisted the subprime crisis.
- Aurora Cannabis, which has grown by over 1,700% of its value between the lowest and highest share price and that regularly experiences rebounds considered by the analysts as extremely attractive.
- Aphria, that has also experienced a growth on the stock market of 2,000% between its lowest and highest levels and which can also be profitable for trading on the rebound.
- Hemp, this is one of the oldest assets on this market and offers a highly beneficial volatility with numerous rising and falling micro movements which makes this ideal for trading over the short term.