Cannabis is all the rage these days, with a myriad of localities legalizing both recreational and medicinal marijuana now that the public is finally warming up to Mary Jane. This has led to an ongoing cannabis boom that saw certain pot stocks soar to impressive heights as cannabis markets began to mature in the United States and Canada. These days, however, many cannabis companies have seen their stock value plummet following certain news cycles and industry developments, opening the door to value investors who understand the great opportunity facing them.
Here’s why cannabis stocks now appeal to value investors, and why we can expect the cannabis industry to survive and thrive after this small slump subsides.
The cannabis market is in a three-year low
Things have been far better for many cannabis stocks; while many industry leaders took off after it became clear a few years ago that Canada and the United States would have slow but sure to develop marijuana markets, most stocks have since slumped and are mired in such a low range of valuation that many investors have fled the market altogether. Cannabis stocks are only undergoing a temporary setback, however, which is why so many value investors who reasonably argue that these stocks are underpriced are beginning to flock to the cannabis sector in new numbers with greater enthusiasm than ever before. Given that many nascent cannabis companies have immensely high cash-burns with relatively few ways to balance out their budgets in the near future, some investors have given up on cannabis stocks altogether. Where some sense decay, however, others see juicy opportunities. Certain pot stocks like iAnthus have begun attracting value investors in droves thanks to plummeting valuation figures, for instance, which will bode well for these investors in the future as the industry matures and companies grow wiser about their financing.
One of the reasons that the cannabis industry is slumping is because of a regulatory cloud that still looms large over many companies; even in Canada, the legal status of marijuana is still slightly endangered by a looming stigma surrounding the drug, and in the United States cannabis remains federally prohibited despite the fact that the American public is warming up to it like never before. Given that this regulatory malaise isn’t likely to abate anytime soon, value investors can rest assured that many cannabis stocks will continue to struggle for a while, but that they’ll ultimately begin to take off again when legalization (which is growing closer by the day) becomes impossible to prevent. Aggressive selling by some investors has also given many the indication that the cannabis sector is substantially weaker than it actually is. There are so many budding marijuana businesses taking off these days that many early investors who didn’t know what they were doing made the wrong choice, leaving value investors with an incredible opportunity to profit from an industry-wide slump if they back the right horse while prices are still low.
What to look out for
So, what should value investors interested in foraying into the cannabis market lookout for? First and foremost, understand that volatility is perfectly natural in this kind of marketplace, as the dubious legal status of cannabis in the United States renders it unlikely that the market will stabilize shortly. Reading up on some of the most volatile cannabis stocks can help elucidate to you just how shaky the marketplace is, which is excellent news to those value investors who want to capitalize on misguided panic and the poor decisions of other market actors who jumped the gun.
Those interested in investing in cannabis enterprises must also know that character counts; many entrants into the cannabis industry are passionate about the drug but not up to snuff on their business fundamentals, so ensure that you find a quality company ran by reliable individuals in this industry more so than any other. It’s thus worthwhile to review the example of certain companies like Cannaone Technologies Inc (CSE:CNNA), as these brands have thrived because they’ve managed to convince customers that they take consistency seriously when it comes to the consumer experience. Companies like CannaOne that specifically focus on e-commerce also have the added allure of being particularly well-situated for a market future that’s going to be increasingly defined by digital services.
Why does such a digital focus matter? Largely because tomorrow’s consumers are going to want quality cannabis products delivered right to their door with just a few clicks of a button. Brands like CannaOne which manage to pioneer this element of the cannabis industry early on will thus likely swell in value later on, which is leading many value investors to flock to them now while the opportunity is still ripe. Finally, remember that all things must past and that the federally prohibited status of cannabis will inevitably waste away, ensuring that the industry as a whole has an immensely bright future ahead of it. Regardless of its current predicaments, value investors everywhere should be looking eagerly to the cannabis market for opportunities to earn a huge profit.