Cannabis: Should You Invest?

Why the cannabis sector is an attractive investment.

The changes in public opinion and the potential growth of the market makes the cannabis sector a truly attractive investment to consider, especially for portfolios that are diversified and can withstand a degree of volatility.

In 2019, the total cost of legal cannabis sales around the globe was $15 billion — a 36% increase over the previous year, but still less than 10% of the estimated $160 billion in the market.

The cannabis industry has ignited the imagination of investors around the world. Aside from the purported health properties of this plant, recreational use is generating a great deal of money. In early 2014, Colorado was among one of the first states to pass a law approving the retail sale of cannabis for recreational use. Sales reached more than $112 million a month last April, reflecting an average annual growth of 939%.

Colorado state tax revenues and licenses from the cannabis industry have become a significant income source. According to the state tax authority, revenues totaled more than $300 million in 2019 and more than $1.3 billion on a cumulative basis since the legalization in 2014. The total volume of cannabis sales in Colorado since the legalization has totaled a whopping $8.4 billion.

Liberalization of Regulation

In October 2018 Canada became the first country among the G-7 to allow the use of cannabis for leisure. Consumption grew from 54% at the end of 2018 to 63% at of the end of 2019. Sales in March 2020, according to the regulatory body Health Canada, totaled $132 million – an increase of 197% compared to the same period in 2019.

Mexico and New Zealand may be the next countries to undergo a process of legalizing cannabis for recreational use. Mexico intends to propose legalization by the end of the year, and New Zealand will hold a referendum on cannabis legalization in September 2020. Long-term trends point to increased liberalization of cannabis use regulation, making the industry an enticing arena to invest in.

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