3 Reasons Why You Should Invest in Cannabis Stocks

The stock market can be the best place to create wealth because of the endless opportunities it offers to grow your money — you can back anything from value plays to rule-breaking mavericks. Whatever your style, you’ll want to put your cash behind companies that can grow their revenue. Some of the most promising can be found in the cannabis sector…

Cannabis is one of the fastest-growing industries across the world. In the U.S. in particular, the sector is expanding at a rapid pace; 11 states and Washington, D.C., have legalized marijuana completely, while 33 states and D.C. have done so for medical purposes. Voters in five other states are voting on some form of legalization in November.

Outside the U.S., Canada is the world’s biggest cannabis market after having legalized cannabis flower in 2018 and cannabis derivatives in 2019. Other countries where marijuana is legal or decriminalized include Uruguay, Peru, Spain, and South Africa. As the legal status of cannabis spreads, the sector in general has done well during quarantine (the Horizons pot ETF is up 6% in the past six months, which is not bad after its 40% decline in 2019). While not every pot-related company is a winner, selecting the right ones can be a surprisingly safe way to add the returns from a booming industry into your long-term portfolio.

There are three broad ways to invest in the cannabis sector. Some companies, such as Canopy Growth (NYSE:CGC) and Green Thumb Industries (OTC:GTBIF) are involved in cultivating and growing marijuana itself. Others, including Scotts Miracle-Gro (NYSE:SMG), are involved in distribution and retail marketing.

Here are three reasons why the right cannabis stocks make sense for the long haul.

1. Long-term growth

Given all the buzz surrounding the cannabis market and the increasing recognition of the legitimacy of cannabis, the industry is expected to grow tremendously. The market should expand for cannabis both recreationally, because of legalization, but also medicinally, thanks to the wide range of potential benefits and therapeutic applications the herb offers.

According to a report published by Grand View Research, the global legal marijuana market is anticipated to reach $73.6 billion by 2027 — that’s a CAGR of 18%. Another analysis from Cowen shows that “the cannabis market could generate as much as $75 billion in gross annual sales by 2026, up from a prior forecast of $50 billion.”

Looking past the short term, there’s tremendous growth for the global cannabis industry — making marijuana stocks an intriguing long-term investment.

2. Outstanding revenue numbers

Marijuana’s legal status in Canada allows pot companies to be traded freely on the country’s market exchanges, and plenty of U.S. and Canadian businesses involved with marijuana are publicly traded on U.S. stock markets as well. (Because marijuana is still illegal on a federal level, “pure-play” marijuana companies do not trade on U.S. markets.) As legalization continues to spread, more and more companies will join the public listings, boosting the sector’s fortunes in general.

Lawn and garden care products supplier Scotts Miracle-Gro has shown outstanding revenue increases over the past three quarters. Recently, the company reported a…

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