You should understand these three things before investing in marijuana stocks
Within 15 years, it is predicted that the legal marijuana market could be worth as much as $200 billion. If that is true, marijuana stocks are going to be a solid investment and, if embraced now, could lead to returns that rival those of both alcohol and tobacco. However, there is still a lot of confusion about how to invest in marijuana stocks, but these three things should help you build a strong foundation.
First, look at the company’s financial footing. Make sure it’s solid and keep an eye on the company’s balance sheet, the sheet that tracks the entity’s assets, liabilities and shareholder equity. By evaluating changes in cash and debt, you can make sure that you’re investing in a top-quality company that is able to capitalize on the growing global cannabis market.
Next, consider the production capabilities. Forecasts are one thing, but what is actually produced is another and is a better gauge. Look at quarterly production levels and concentrate on kilos sold and kilos harvested. This will show an investor whether the company is keeping up with its growth strategy or if it’s beginning to lag behind forecasts.
Diversification is going to play a key role in the success of cannabis companies, at least in the short-term. Consider how diversified a company’s portfolio is and the types of products it offers. Products based on extracts are typically better performers than dried cannabis flower, but only concentrating on extracts – or flower – can be detrimental to the investor’s long-term portfolio growth.
Billions of dollars are already being added to the legal cannabis marketplaces and this is going to continue to increase. It may still be too early to tell who will come out on top, but if you keep your eye on these three points, you’ll be in a better position to move your investments as the market changes.