Regulation is the key to its future potential in the markets
- The regulation of cannabis for recreational or medicinal use in many US states, as well as in Canada as a whole, has led to a stock market explosion that has even been called a bubble.
- Experts agree that there is significant potential for growth within this industry, provided that state approval is granted.
- 600,000 users are medicinal cannabis users, while 4 million are recreational cannabis users in Spain, so its growth potential is quite significant.
For a long time, we've seen the marijuana sector boom on the stock market. The regulation of its recreational and medicinal use in many U.S. states, as well as across Canada, has led to a stock market boom that has even been called a bubble.
After these revaluations, the question is... Does it have the capacity to expand the gains it has demonstrated over the years? It all depends on one factor: regulation.
Experts agree that there is significant potential for growth within this industry, provided that state approval is granted. They can take advantage of the regulations that may begin to emerge in some developed countries.
Read more: The other cannabis business: Why companies like Coca-Cola and Heineken are flirting with cannabidiol
According to Pablo Gil, director of trading methods and market strategy at XTB, the sector is attractive to all types of investors "if we look at the number of countries that are considering legalizing cannabis, both from a recreational and medicinal perspective."
How do you invest in this? There are so many publicly traded companies, so it's not easy to get in. One option, Gil points out, is to "bet on the Bita Global Cannabis Giants Index, which focuses on the 20 largest cannabis companies and has a minimum trading volume of one million dollars."
The most interesting aspect is the performance of this index. As he explains, it has quite high volatility, "higher than the 60% over the last year." This makes it "quite interesting for retail investors" due to the profits they can achieve. This type of performance generates many buy and sell options, albeit with "very high risk."
The return for the year is 341% 3Q1, although looking at the last 12 months, it's 01% 3Q1. The volatility is due to the industry's very young age, probably due to expectations regarding regulation.
Fernando Soriano, CEO and co-founder of S&F Abogados, explains that there is a significant bubble with cannabis, "among companies" at a time when there is no "regulation as such," since Canada is the only country that has "dared to do so."
From his perspective, cannabis has great potential, especially in terms of "recreational use." In this sense, 600,000 users are medicinal cannabis users, while 4 million are recreational cannabis users in Spain, so its potential for growth is significant. The billions in sales, with regulation, could propel the industry to even greater heights.
Juanma Fernández, Commercial Director of MJ Freeway, asserts that one of the main barriers to regulation is the strong stigma surrounding cannabis and a lot of hypocrisy. In his opinion, a strong education program would be "much more beneficial for the sector and for society." This would generate greater growth, which would have an impact on the markets.
Following this framework, in terms of the profitability ceilings that marijuana can provide, Gil believes that if the market is regulated, there will be "many companies (both those dedicated to production and sales, as well as those in the financial sector or REITs) that will benefit."
Then there's all the medicinal development that "will happen," he adds. Ways to consume cannabis other than through tobacco: oils, foods, vapes, etc. It could explode "in the coming decades." So, if we anticipate that assets will rise, "investors will position themselves in advance, as they have done with other types of assets." We've seen this with Amazon and Apple. Furthermore, legalization would generate around 90,000 jobs.
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