are cbd companies a good investment

Below we look at the top five marijuana stocks with the best value, the fastest growth, and the most momentum.

Momentum investing is a factor-based investing strategy in which you invest in a stock whose price has risen faster than the market has as a whole. Momentum investors believe that stocks that have outperformed the market will often continue to do so because the factors that caused them to outperform will not suddenly disappear. In addition, other investors, seeking to benefit from the stock’s outperformance, will often purchase the stock, further bidding its price higher and pushing the stock higher still. These are the stocks that had the highest total return over the past 12 months.

Best Value Marijuana Stocks

The marijuana industry is made up of companies that either support or are engaged in the research, development, distribution, and sale of medical and recreational marijuana. Cannabis has begun to gain wider acceptance and has been legalized in a growing number of nations, states, and other jurisdictions for recreational, medicinal, and other uses. Some of the biggest companies in the marijuana industry include Canopy Growth Corp. (CGC), Cronos Group Inc. (CRON), and Tilray Inc. (TLRY). Many big marijuana companies have continued to post sizable net losses as they focus on investing in equipment to speed up revenue growth.

These are the marijuana stocks with the highest year-over-year (YOY) sales growth for the most recent quarter. Rising sales can help investors identify companies that are able to grow revenue organically or through other means, and find growing companies that have not yet reached profitability. In addition, earnings per share can be significantly influenced by accounting factors that may not reflect the overall strength of the business. However, sales growth can also be potentially misleading about the strength of a business, because growing sales on money-losing businesses can be harmful if the company has no plan to reach profitability.

Fastest Growing Marijuana Stocks

Marijuana stocks, as represented by the ETFMG Alternative Harvest ETF (MJ), have dramatically underperformed the broader market. MJ has provided a total return of -28.6% over the past 12 months, well below the Russell 1000’s total return of 25.2%. These market performance numbers and all statistics in the tables below are as of Jan. 6, 2022.

Are cbd companies a good investment

“We see that as a proxy for their product’s efficacy and quality, which is very important to us,” says Metzler.

“That’s why we only buy companies with a Certificate of Analysis from quality labs we trust, and we require our portfolio companies to track each individual product’s quality and make that available to all of their customers,” says Metzler.

“Investors need to understand that the regulatory landscape is in flux, though it appears to be headed in the right direction,” writes Brochstein. He emphasizes the importance of investing in companies that file with the SEC. The popularity of CBD has come with plenty of opportunists, Brochstein says (as do most things when they hit the mainstream).

“Two, we have a new hierarchy of success when it comes to health and wellness,” says Alpert. “No longer are we bragging about how little sleep we got or how many hours we’re working, instead the new currency is: ‘How well can you take care of yourself or invest into self-care?’”

The ‘best’ companies to invest in depend on your investment goals

Investing in CBD versus other companies that make products with tetrahydrocannabinol (THC, the psychoactive chemical in cannabis) isn’t necessarily better, says Metzler. That choice is dependent on your investment goals.

Hemp-derived CBD is federally legal but that doesn’t mean all products are OK to invest in, let alone use. Make sure your investment of choice follows the laws, stays ahead of changing regulations, files with the U.S. Securities and Exchange Commission (SEC), and meets other qualifiers.

Consumers have long been interested in the nonpsychoactive chemical in cannabis sativa, cannabidiol, more widely known as CBD. With the passage of the 2018 U.S. Farm Bill legalizing hemp-derived CBD nationwide, more companies are entering the marketplace to offer myriad CBD-laced products that tout everything from pain-relieving properties to lessening anxiety. As interest in going into the CBD business has grown, so has investing in that growth. But as with all potential opportunities, investing — especially in a new concept that has legal parameters — comes with its own set of risks.

Before you invest, consider the risks

There are few studies on CBD’s health benefits, but what’s been found is promising. Harvard Medical School writes that research suggests CBD can relieve anxiety, insomnia, and chronic pain. Most notably, the Federal Drug Administration (FDA) approved CBD-based Epidiolex by company GW Research Ltd. in June 2018. The drug is used to treat some rare forms of epilepsy in children over the age of 2.

“Many of the publicly traded companies don’t appear to be real, with several trading on the (off-exchange trading) that don’t even file with the SEC, including one of the first ‘public’ companies in the space, Medical Marijuana, Inc.,” writes Brochstein. “While some of these appear to be more substantive than others, a sudden change in business models is certainly a yellow flag, and investors should be slow to credit companies for just simply stating their intentions.”