Splifs and Stocks: Marijuana Investments Are on the Rise

Legal or not, marijuana has always meant big business and major profits for those involved. And now that attitudes are changing, marijuana has become popular with traders on Bay Street and their counterparts in New York. It's easy to understand why. Under Canada's Harper government,...

Legal or not, marijuana has always meant big business and major profits for those involved. And now that attitudes are changing, marijuana has become popular with traders on Bay Street and their counterparts in New York.

It's easy to understand why. Under Canada's Harper government, restructured medical marijuana laws put the production and sale of the plant under the control of MMPR Licensed Producers. In 2014, medical cannabis became a legalized industrial scale operation, and a few companies went public, allowing for trade on the stock market.

Initially, investors were relatively slow to support the new industry, largely because the status of weed in Canada was in flux. The Harper government didn't support medical marijuana, let alone full legalization; on the opposite end, the Liberals and NDP were both in favour of seriously reforming cannabis laws. But now, especially since the ruling party has outlined a path towards full legalization, business is blossoming.

The 2015 election

Companies like Canopy Growth (Tweed), Aphria and Organigram Holdings all saw their stock prices nearly double when the Liberals swept into power last fall. The biggest among these, Canopy Growth, is trading at just over $2.50, but is valued at nearly $180 million. While that may seem small, they're at the forefront of a very young industry.

These companies are well positioned to dominate the market following legalization. While they're lacking a solid distribution method via Health Canada, these businesses already have the proper infrastructure in place. Once the recreational marijuana industry finally opens up, they will be competing in a market that is expected to generate anywhere between $4 to $6 billion annually in Canada.

Tweed Farms in Ontario
Tweed Farms in Ontario

American influence

Even more exciting is that our neighbours to the south are spurring the pot stocks trend.

The United States is undergoing a state-by-state reform of its marijuana laws, with 24 states allowing medical use; another four, along with the nation's capital, have legalized it outright. Governments in the past have fought state-backed legalization efforts, but they're now viewing early adopters as experiments. All major candidates running for president have vowed to let it continue, meaning America's future will involve cannabis in some form or another.

Legal weed is proving to be good business, and business is only expected to grow. In 2015, revenues generated from marijuana sales climbed above $5 billion. They're expected to continue growing to almost $7 billion this year, and $22 billion by 2020. These are enormous sums that were once funnelled into the pockets of pushers and gangs, but are now finding their way onto Wall Street.

Marijuana is a massive untapped market for businesses, and by extension, their investors. Right now is a great time for people to get into the market; the stocks are relatively cheap in comparison to the big players in more established industries, and they're likely to only grow in the near future.

Feature Image: hxdbzxy / Shutterstock.com

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