How to Invest in the Fast Growing Cannabidiol Industry

CBD-Oil-Stocks-2018
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CBD Oil Stocks 2018

There are many reasons why some people don’t like marijuana. That said, marijuana/cannabis has a lot of proven medicinal benefits. For those who have medical conditions that marijuana might be able to treat, but don’t want to get high, there are cannabis derivatives like cannabidiol (CBD).

When CBD is consumed as a pill, powder, tincture, topical ointment, spray, oil, etc., it has been shown to help with anxiety, bipolar disorder, and Parkinson’s disease.

That might explain why the CBD market is exploding and why, over the next four years, it is expected to post a compound annual growth rate (CAGR) of 31%. (Source: “Global CBD Oil Market 2018-2022 to Post a CAGR of 31%,” Business Wire, July 23, 2018.)

Whereas it’s now difficult for investors to find undervalued marijuana stocks, the CBD market is still mostly untapped.

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What Exactly Is Cannabidiol?

It might be a good idea to start off with what CBD is not. It’s not pot, weed, skunk, Mary Jane, or chronic. Instead, most CBD comes from hemp, which contains only trace amounts of tetrahydrocannabinol (THC), the psychoactive ingredient that gets you stoned.

For investors who don’t like investing in so-called “sin stocks,” CBD company shares might be a great addition to a retirement portfolio.

Yes, there are tiny amounts of THC in CBD, but there are also trace amounts of alcohol in soda (0.001% per liter). Meaning, it’s getting tougher to define what a sin stock is these days, so investors have to pick their battles.

Cannabidiol is a chemical in the cannabis sativa plant. CBD is a naturally occurring compound found in the leaves, flowers, and stems of hemp and cannabis plants. To date, over 100 chemicals have been identified in the cannabis sativa plant.

What’s the big deal about CBD? The medical community is excited about the substance because of its antipsychotic effects.

How exactly CBD works is not yet clear, but clinical research into cannabidiol shows that it prevents the breakdown of a chemical in the brain that affects, mood, pain, anxiety, and mental function. It also appears to reduce symptoms associated with schizophrenia.

CBD is not yet recognized by the U.S. Food & Drug Administration (FDA) as a medically beneficial compound, but scientific studies (many sponsored by the U.S. government) show that it could be used to treat a wide range of conditions, including arthritis, insomnia, anxiety, chronic pain, and epilepsy. (Source: “Cannabidiol (CBD) — what we know and what we don’t,Harvard Medical School, August 24, 2018.)

CBD is used on a regular basis by some people who are relatively healthy. CBD is known to reduce stress and, when taken in small doses, it makes people feel more alert and focused.

Because CBD is (for the most part) legal and not regulated by the FDA, you can find it online and in stores in virtually every U.S. state. That said, because it is not approved as medicine, manufacturers of CBD products are not allowed to make specific health claims.

Still, if you happen to live in a state where the use of recreational weed is legal (e.g. Colorado, California, Oregon, Washington, Alaska, Nevada, Maine, and Massachusetts), you can find a plethora of CBD products at your neighborhood weed dispensary.

Cannabidiol Market Size and Cannabidiol Market Forecast

The legalization of marijuana in many U.S. states (and in countries like Canada), has moved CBD to the front burner when it comes to research and development. Not only are the prospects of CBD oil massive, but so too is the demand. And Wall Street knows it.

So, what is the market forecast for cannabidiol?

In 2015, the CBD market was pegged at just $90.0 million. According to the Hemp Business Journal, $450.0 million of the forecast $2.1 billion in sales by 2020 will come from hemp-based products. That represents a 700% increase from 2016.

But even that Cannabidiol market forecast might be a little conservative.

“In terms of the CBD market size, I estimate an almost $3 billion market by 2021. Right now there are 15 states that allow CBD only — this is in addition to the 28 states plus DC that have legalized medical marijuana,” said Matt Karnes of Greenwave Advisors LLC. (Source: “The Cannabis Market That Could Grow 700% By 2020,” Forbes, December 12, 2016.)

According to a 2018 report, the demand for CBD used for chronic pain is expected to help fuel the medical cannabis market. The medical cannabis market is projected to grow from $7.0 billion in 2017 to over $55.0 billion by 2024. (Source: “CBD Demand for Chronic Pain Treatment is Set to Grow the Medical Cannabis Market,” Cision, September 4, 2018.)

As the CBD and medical cannabis market grows, investors will be looking for the areas with the most investment opportunities. Right now, the U.S. (the world’s biggest economy) and Europe (the world’s largest economic region) are the leaders when it comes to CBD, recreational cannabis use, and medical cannabis.

By all accounts, the U.S. and Europe will continue to dominate the CBD field.

By 2022, marijuana sales in Germany are forecast to reach almost $1.6 billion. While less than one percent of the German population consumes medical marijuana, the future looks bright. Germany only just legalized medical marijuana in 2017. (Source: “The Three Most Overlooked Marijuana Markets,” Forbes, August 26, 2018.)

The laws in the United Kingdom (England, Wales, Scotland, and Northern Ireland) governing marijuana are very strict. Nevertheless, the U.K’s Advisory Council on the Misuse of Drugs has recommended that cannabis-derived medical products be available by prescription. (Source: “Cannabis-derived medicinal products recommended to be available on prescription,” GOV.UK, July 24, 2018.)

In Switzerland, there are more than 400 registered companies manufacturing or trading CBD. The combined total is just $62.0 million, but that is expected to increase significantly over the coming years. (Source: Forbes, op cit.)

Top Cannabidiol Oil Stocks List

The medical cannabis and CBD markets are expected to experience tremendous growth over the next few years, making them some of the hottest stocks in the marijuana market. Unfortunately, a rising tide lifts all boats, meaning that many CBD stocks are not really worth a second look.

Keep in mind, the best CBD oil stocks are not pure plays; they also operate in the medical marijuana sector.

Furthermore, many of these stocks trade in Canada (in addition to the over-the-counter stock market), which means they will be able to take advantage of a new market when legal recreational marijuana hits the shelves in that country on October 17.

With this in mind, here is a list of the top CBD oil stocks right now. Some are doing well but others have taken a beating. They all have great long-term growth potential, though.

Company Name Stock Ticker
Neptune Technologies & Bioressources Inc NASDAQ:NEPT
Aurora Cannabis Inc OTCMKTS:ACBFF, TSE:ACB
Isodiol International Inc OTCMKTS:ISOLF, CNSX:ISOL
Aphria Inc OTCMKTS:APHQF, TSE:APH
Canopy Growth Corp NYSE:CGC
CV Sciences Inc OTCMKTS:CVSI
CannaRoyalty Corp OTCMKTS:CNNRF, CNSX:CRZ
MPX Bioceutical Corp OTCMKTS:MPXEF, CSNX:MPX
Golden Leaf Holdings Ltd OTCMKTS:GLDFF, CSNX:GLH
GW Pharmaceuticals PLC NASDAQ:GWPH

Analyst Take

The recent CBD market analysis clearly points to robust growth over the next few years. And the best CBD oil stocks will be those that can take advantage of current market trends and broad advancements.

That said, many CBD oil stocks would be classified as penny stocks. That’s why it’s important to do a lot of research and determine which CBD oil stocks are poised for growth and which ones deserve to go up in smoke.