Finance Monthly September 2021 Edition

52 www.finance-monthly.com INVESTMENT - CANNABIS STOCKS In recent years, several countries and states have legalised the use of cannabis for medical and recreational purposes. In 2013, Uruguay became the first country in the world to legalise cannabis for recreational use, with Canada following suit in 2018. In the US, Marijuana remains illegal as a recreational drug at federal level, but numerous states, including Washington, California, Colorado, and Nevada, have now moved to legalise it within their borders. In the UK, the medical use of cannabis was legalised in November 2018, after the cases of two epileptic children, who benefited substantially from using cannabis, drew increased public attention to the matter. By 2030, the cannabis industry is set to be worth $100 billion in the United States alone, a forecast that certainly makes cannabis an investment worth considering. In the most recent quarter, Jushi Holdings Inc (JUSH.CX) — which is a multi-state company focused on building a portfolio of branded cannabis and hemp-based assets — was the marijuana stock with the highest year-over-year (YOY) sales growth, with revenue growth of 355.4%. There are three key ways in which cannabis investment can be done: through directly investing in marijuana shares, spread betting, or CFD trading. However, it is important to note that both spread betting and CFD trading carry much higher risks. For those who are new to trading, it is wise to stick to investing in cannabis shares directly. What are cannabis stocks? Cannabis stocks (or marijuana stocks) are the shares of companies that are either involved in the growing of cannabis, involved in the pharmaceutical or biotech developments of medical cannabis or are suppliers of cannabis products and services. There are two main types of cannabis products: recreational or medical, with the vast majority of companies being involved in the latter. In recent years, there has been a lot of evidence to suggest that cannabis products have positive effects on people suffering from a wide variety of medical conditions. Preliminary research suggests that cannabis can help to reduce chronic pain and muscle spasms, can alleviate nausea during chemotherapy, can improve appetite in people suffering from HIV/AIDS, and can even treat severe forms of epilepsy, as seen in the UK. Understanding the risks of investing in cannabis stocks As with investing in any type of asset, it’s important to understand that there is always some degree of risk involved. Before investing in cannabis stocks, there are some specific risks you should weigh up: • Political risks: Although it is legal to trade and invest in publicly listed shares of respected companies that operate within the cannabis industry, some countries, such as the US at federal level, place heavy restrictions on banks that deal with cannabis- related businesses. Consequently, it can be very difficult for affected cannabis businesses to access vital financial services, potentially jeopardising their chances of long- term survival. • Cash flow issues: Many cannabis industry participants are growing companies that yield small profits and frequently face the risk of running out of cash. These businesses often raise capital by issuing new shares, decreasing the value of existing shares. • Imbalances with supply and demand: As a rapidly expanding sector within the agriculture sector, cannabis is especially vulnerable to irregularities in supply and demand. Following the legalisation of cannabis in Canada in 2018, Canadian cannabis growers undertook huge expansion initiatives to up their production capacity to meet demands. However, many Canadian growers have now scaled back their production as cannabis supply in the country is now outrunning “By 2030, the cannabis industry is set to be worth $100 billion in the United States alone, a forecast that certainly makes cannabis an investment worth considering.”