You must have heard about the buzz CBD is producing and how the demand for the drug is rising. CBD or Cannabidiol is the main chemical compound of the Cannabis or hemp plant & is beneficial in treating many diseases. Manufacturers extract the compound and sink it in oils like olive, coconut, or hemp oil to produce the CBD oil.
People are going crazy over CBD because of its numerous benefits like reducing pain, inflammation, stress, treating depression, improving sleep, etc. As you can see, the industry is growing, and there are predictions of more growth as the industry. The CBD industry is still in its nascent stage, and you must be thinking of investing in some CBD stocks.
Here in this article, we discuss why you must think about investing in CBD stocks and what are risks you might face.
Does this industry has any future?
FDA legalized CBD in the 2018 Farm Bill, and since then, there is the hype about CBD products in the USA and North America. Since then, there is no looking back as the variety of CBD products like CBD Vape Oil and people’s interest in them keeps rising. As a result, manufacturers keep on coming with different products like CBD oils, tinctures, capsules, pills, edibles, gummies, and even chocolates & pet treats.
In a 2019 survey in America with 4000 people, it was found that ⅓ rd of them have already tried CBD. Moreover, one in seven people then consumed CBD regularly. In addition, people from all ages groups are trying CBD, especially those who are above 20.
The growing popularity of hemp and CBD products
Anyone can see the popularity of CBD products is rising in leaps and bounds and maybe that’s why the thought of investment came into your mind. From cafes selling CBD lattes to spas giving CBD massage, the chemical compound is practically everywhere. Also, CBD-infused beverages are also very popular these days, as with that, you can get both the taste and benefits in the same container.
Local companies have also started to sell CBD products, seeing its popularity, thus gaining some profits. In addition, convenience stores and shops are giving out devoting shelves for CBD products in popularity and demand.
The business has attractive margins
You can also note that the popularity of CBD is not only increasing sales, but the industry has high-profit margins as well. However, there are strict legalization issues with hemp and cannabis, and commoditization and oversupply of dry cannabis flowers are very common in US markets. For this reason, growers need to be very careful about the diversification of their products to avoid loss in margin.
That is why hemp growers of North America prefer to invest in CBD oils specifically. The products that contain CBD oil, such as vapes, topicals, oils, capsules, beverages, are of higher price. People are ready to pay a high price for these rather than dry cannabis flowers.
How to find the best stock for you to invest in?
There are some things you need to consider while searching to buy a CBD stock.
- Research about the management team of the company’s stock you are willing to invest in.
- See the company’s future growth plans and strategy and their position in the market.
- Look at their financial statements, though a CBD company’s financial statements are hard to find.
- See whether the company has issued any convertible bonds or warrants and if, how many?
Invest in your favorite CBD stocks
If you are a very traditional investor and don’t want to take high risks, CBD stocks are not the right option for you. These stocks have high margins and high risks; invest only if you are ready to deal with that. Even if you are confident, don’t put a lot of money into one CBD or marijuana brand.
Start with a small amount in a CBD stock, and as the market grows, your share’s revenue will grow.
What are the risks of investing in CBD stocks?
If you are ready to invest in CBD or marijuana stocks, keep in mind the risks attached to this industry.
- Political and legal risks- It is still illegal to sell marijuana in the US at a federal level. Moreover, banks don’t want to provide loans to this industry as well.
- There are frequent imbalances in the supply and demand of the products in the CBD industry.
- Most companies don’t file financial reports, which is not great in the position of an investor.
If you are willing to take the risk, this is a good time to invest as the market is in its nascent stage with a high probability of growth.