Investors looking to take a flyer on the “budding” industry need to understand that risks go up when companies “touch the plant.” Safer plays are further down the supply chain.
Cannabis has been legalized for medical use in 29 states and approved for recreational use in eight, and market observers, including the majority of financial advisors, believe it is only a matter of time before its national prohibition comes to an end.
That means we are witnessing the birth of a new industry, akin to what happened after the ban on booze ended in 1933. That led to a $200 billion business in the U.S., according to the Beverage Information Group. The fact that pot could be on a similar trajectory—Cowen & Co. predicts $50 billion in annual legal sales by 2026, up from $6 billion currently, for both recreational and medical use—makes investors take notice and look for ways to get in early.