Canada had just become the first G7 country to completely legalize recreational marijuana. This groundbreaking achievement for the cannabis industry resulted in some shares gaining on the stock market. One of which is Tilray, a company that entered the stocks exchange shortly after the approval of the Cannabis Act.
Tilray’s stocks were introduced mid-July. Investors who bought the $22 share back then gained a lot when the price suddenly surged to more than $200 mid-September. After setting a bar, Tilray’s stocks plunged to $99.50. Now, the share is playing around the $140 mark. In a span of three months, the company’s shares soared to highs and lows. Since then, investors began to worry about the cannabis industry as a whole.
Pot stocks have to jump through many hurdles
While the cannabis industry will experience unparalleled growth in the coming years there is no guarantee that all pot stocks will move in the same way. Some stocks may even be overvalued by investors. The growth of the companies is affected by many factors including low margins, fragmentation and low barriers for entry.
In Canada, the cannabis industry is expected to flourish months after recreational marijuana is legalized. However, there will be stiff competition within the nation, thus making cannabis stocks more undesirable for investors. Furthermore, the cannabis industry is fragmented in the U.S. as there are varying laws per state. These are the major hindrances for cannabis companies so far.
Is CBD the best option for now?
What investors could do is to try out a safer alternative through cannabidiol (CBD) companies. The CBD industry is poised to be worth $2.1 billion by 2020 and $57 billion by 2027. The positive outlook is caused by the fact that there is not much stopping the industry. CBD products are typically legal in the U.S. as most products are derived from hemp and have less than 0.3 percent THC.
There is also a strong demand for CBD products in certain states including New York and Florida. Products are seen in cafes, restaurants, hotels, spas and more. The CBD industry is not facing the same hindrances that marijuana is having trouble with.
CBD researcher and developer PotNetwork Holdings, Inc. (OTCMKTS:POTN) is meeting success in the industry with the help of its distributor, Diamond CBD, Inc.
In terms of sales, Diamond CBD is not falling short of its goals this 2018 as, during the first half of the year, it was able to make over $12 million in sales. With a growing line of quality products, it easy to see why both companies will be prominent in the years to come despite the fierce competition.
The cannabis industry is understandably enticing for the eyes of investors but they should understand that is going through a lot of changes in such a short amount of time. It is still prone to many changes and volatility so investors should proceed with utmost caution before making any major purchases.
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