2018 was one of the strangest and most successful years in the marijuana industry’s history. Marijuana gained validity with Canada being the first country in the world to make recreational marijuana legal and several states in the U.S. allowing either medical or recreational use of cannabis. The first drug derived from cannabis was approved by the USFDA, and the Farm Bill legalizing cannabidiol and hemp was signed by President Trump.
Marijuana Stocks Took a Hit
While pot found legitimacy during 2018 the stock did not fare as well. Horizons Marijuana Life Sciences ETF, was up in mid-October but fell by nearly half during 2018 holding over four dozen pot stocks. It is not clear whether 2019 will be any better for investing in marijuana stock, but there are trends with the potential to be profitable.
Heading into the new year there seems to be more offered by small-cap marijuana stocks than mid and large-cap stocks. In 2018 the bigger stocks were more likely to have gotten a brand-name to partner with them giving them substantial valuation premium. This gives the smaller stocks the opportunity to take center stage in the new year.
Stocks should have a market cap of $200 million to $1 billion. Anything less and the stock is open to being manipulated in the short term. There is concern over the survival of micro-cap stocks, in the long run, making the valuations remain low.
Small Cap Company to Watch
OrganiGram Holdings: market cap approximately $400 million. The Canadian grower is expected to peak production of cannabis with 113,000 kilograms. Profits will be better per share because of the cost-efficient growing methods that involve one grow site and a three-tiered system for growing.
Ancillary Pot Stocks
Ancillary companies are those that assist the cannabis industry without being directly associated with the plant. These type of companies have lower operating costs and can have multiple revenue sources which reduce the risk associated with them when compared to those directly involved with cannabis plants.
Products with a CBD base could be the thing to piggyback the markets highest trend during the year. The increase in options for legalized products has the potential to lead to higher margins for items allowing alternative consumption methods.
More form of consumption is expected to be legalized, and stocks are expected to see growth from $591 million to $22 billion by 2022.