These points are most important when considering a marijuana stock investment
Some investors may believe that the only thing that matters when considering making a marijuana stock purchase is the output – which company has the largest production capability. However, this is definitely not the way to go. If it were, Aurora Cannabis would be leading the stock market. Instead, think about these five different points when making a marijuana investment decision.
In lieu of how much can be produced, look at how much of how many types can be produced. A larger diversity in marijuana options makes a company stronger as it doesn’t risk losing its only source of income through competition or natural disasters.
International expansion is another important factor. Domestic distribution is nice, but those companies that are thinking about the big picture and want to move into other countries are most likely to succeed.
Guaranteed profits can help shore up any business, especially during weak consumer markets. Marijuana stocks currently aren’t that profitable due to volatility, but a few companies are proving to be the exception. One, Innovative Industrial Properties, for example, doesn’t rely on marijuana sales to earn money. It owns cannabis properties in the U.S. that cultivate and/or process medical marijuana and leases cannabis assets through contracts that span 15-20 years. This means that it will have guaranteed income through management fees and rentals.
Access to nondilutive funds is important. Many companies are leveraging everything in order to help their businesses grow, but this means they’re not very liquid. This doesn’t leave them in a good position should things turn downward. Those that have a lot of cash won’t have to dilute stocks to stay afloat, given them a significant amount of market strength.
Partnerships are also a key factor. Look at the individual companies – where they stand financially and what they are going to bring to the table. A marijuana company that can partner with an established, respected entity can capitalize on that entity’s success and will have a stronger future.
No marijuana stock is going to make anyone rich overnight. However, there are ways to better understand how the markets are going to work so you can invest your hard-earned money intelligently and prepare for the future.