Carl Esprey - investment in medical cannabis

Why investment in medicinal cannabis is becoming more mainstream

As legal cannabis moves further into the mainstream, could this be a good time to invest in the burgeoning market? Let’s look at some of the signs of growth in this market and why investment in medicinal cannabis is becoming more and more viable for individual investment.

Why is individual investment in medicinal cannabis becoming more popular?

According to the Centre for Medicinal Cannabis (CMC) in its 2019 report, around six million people in the UK have tried CBD. Short for cannabidiol, CBD is a chemical compound derived from cannabis. It is, of course, the non-psychoactive ingredient in cannabis unlike delta-9 tetrahydrocannabinol (THC). In other words, CBD does not get you high. But it does have many health and wellness benefits and is legal in most countries around the world.

CBD is an essential part of medicinal cannabis and is derived from the hemp plant. The World Health Organisation (WHO) confirms in a report that CBD shows no indications it is addictive and that: “To date, there is no evidence of public health related problems associated with pure CBD.”

Many people use CBD to treat stress and anxiety and the CMC says that COVID-19 and associated lockdowns has increased sales. In the UK, figures show that 90% of CBD is bought online, and sales already outweigh Vitamin C (£301 million v £119.22 million).

Legalisation of medicinal cannabis in the UK

Sales in CBD at one retailer online shot up by 125% between February and May 2020 due to lockdown measures. And while CBD sales were already soaring pre-COVID, the market’s growth is marked. For the wellness market, CBD is a hugely exciting product and we can predict massive growth over the next few years.

In the UK, medicinal cannabis was legalised in November 2018, with recreational use of marijuana still illegal. Since legalisation however, medicinal prescriptions in England have been very slow, with just 153 issued. According to Prohibition Partners, a global consultancy in the sector, this is down to there being only a few specialists who can prescribed medicinal cannabis. It’s likely that the relative lack of concrete clinical evidence surrounding its effectiveness in treating specific conditions is to blame.

But with a greater number of clinical trials rolling out, this will change. For example, a trial called Project Twenty21 will, by 2021, have recruited 20,000 patients to the first every medicinal cannabis registry in the country.

What’s the potential future for global medicinal cannabis market?

By 2024 the medicinal cannabis market in the UK alone will be worth more than £1 billion and will service around 340,000 patients. And off course, the health, beauty and wellness industry also use CBD in endless products. The edibles market is slower in the UK than in other countries, such as the US, but this is due to EU food regulations. Therefore, Brexit could open this up in the UK too.

The European market is predicted to grow exponentially too, with statistics showing that by 2024 European market revenue for medicinal cannabis will exceed 2 billion Euros. There are a growing number of companies with medicinal cannabis as their core offering, including our own Portuguese-based EuroCan. And more companies are raising revenue all the time, all of which have the potential to list on stock exchanges in the future.

All of this is positive news for would-be investors but it’s worth noting that CBD stocks have suffered (as have all other stocks) due to the pandemic. While online sales of CBD enhanced products have rocketed, the same can’t be said for prescriptions of CBD. As COVID-19 has prevented many patients from seeing their doctors, this has led to a drop in UK pharmaceutical CBD sales. But market disruption also means lots of investment opportunities in medicinal cannabis.

Invest in medicinal cannabis as part of a wider portfolio

Investors should research beyond any recent stock performances to make a judgement. For example, if a company has a clear proposition and is supported by backing and management, then that represents a good opportunity.

Investing in medicinal cannabis or medicinal marijuana stock can be volatile, but it’s an alternative asset class that has huge potential. According to InvestorsHub, CBD stock that has been popular with private investors recently includes Amfil Technologies Inc, CBD Life Sciences Inc, Grow Solutions Holdings Inc and OWC Pharmaceutical Research Corp.

But investing in this sector is not for the faint hearted, nor for investors who are not used to thoroughly researching the companies they’re getting into. For example, GW Pharmaceuticals is popular with investors because it’s known for a specific treatment for MS (multiple sclerosis) using nabiximols. This was the first natural derivative from a cannabis plant to become legal in any country.

When you’ve decided on your options, the best way to buy stock in the cannabis market is through an online broker. For obvious reasons, online brokers are a better choice right now, and they often offer commission-free trading too.

As every successful investor knows, diversification is key for success. So, I would say that investing in the cannabis market is still for those who are risk aware. The sector has huge potential for medicinal cannabis, but it is still young. Ideally, investors should consider the cannabis market as an extra alternative asset class among their portfolio rather than sinking everything into it.