Every investor should understand how the market for cannabis is developing – now and over the coming weeks, months, and years.
Choosing the companies best positioned to profit in the emerging market helps you gain an edge over those who simply "throw darts at a list of stocks" and pick cannabis companies without regard to industry realities.
But as legalization becomes more widespread throughout the United States and across the whole of Canada investors still face questions about what the realities of a mature cannabis market might be.
For some answers, we can look at Colorado – the first U.S. state to make recreational cannabis easily available.
That made some realities evident.
We know, for example, that in places where vaporizing (aka "vaping") cannabis concentrate is legal, that form quickly takes over a significant part of the market.
Vaporizable concentrates are a value-added product, but they're also fairly commoditized, meaning customers shop by product attributes, such as how rigorously it's been tested, say, or the ratio of tetrahydrocannabinol (THC) to cannabidiol (CBD), as opposed to shopping by brand.
Renegade Investment Expert: "It's time to double down – or even triple down – on your cannabis investments!" Read more…
The traditional marijuana bud, or "flower," market, which in Canada is worth about $1.5 billion today, is still fragmented. Customers there are still experimenting with different strains, different growers and brands, and different cannabinoids and THC to CBD ratios. In other words, there are a lot of questions.
One big question facing the market – both in Colorado and worldwide – is whether consumers are willing to pay up for "super-premium" cannabis. That is, cannabis that is more expensive to produce… but that produces a better smoking experience.
There are many producers claiming to make such cannabis – that's why it's such a big question. After all, no one is going to advertise that they make the lowest-end cannabis on the market any more than Busch admits that its beer is lower-end than a craft brewer's.
So how can an investor tell when a company is really producing super-premium cannabis… or merely claiming to grow it?
That's a very important question because, naturally, the investment case for the genuine super-premium product tends to be much stronger than it might be for the pretenders.
One company last week gave us the answer loud and clear…
About the Author
Greg Miller started working on Wall Street in September, 1987, just a month before the “Black Monday” stock market crash.
During his career there, he became an expert in just about every kind of publicly traded security - from blue-chip and small-cap stocks to municipals, junk bonds, and derivatives. As a portfolio manager, Greg was responsible for over $500 million of assets in mutual funds and insurance company accounts.
After leaving the Street, he designed a successful options trading strategy and made lucrative tech investments for a financial publication. He has also helped develop new products and worked with other editors to hone their strategies. He’s always been dedicated to deep, fundamental research - and he always will be - because he believes buying the very best companies at the right price is the best way to amass wealth in the stock market.