Here are 11 of the best cannabis stocks of 2020
Cannabis stocks have been riding high – here's a bunch you wish you'd bought a year ago.
Just a few years ago, small-cap firm Canopy Growth Corp barely registered among investors at less than CA$2 a share. These days, fund managers must be banging down the doors with stocks jumping as high as CA$69 last year – a tidy 3,798% in 5 years.
The Canadian company (TSX:WEED/NYSE:CGC) is the world's biggest medicinal cannabis supplier. Like other cannabis stocks, WEED's price shot up after Canada and several US states announced the legalisation of cannabis for recreational use in 2018.
It has been a rocky journey since then. Despite the initial bullishness, investor sentiment fizzled in 2019 as the challenges facing the industry became more public.
Many companies reported worse than expected losses thanks to stringent regulations which resulted in an oversupply of pot. That, coupled with the reality that deregulation at a federal level in the US was still far in the making, sent prices crashing as much as half.
But the last few weeks has brought renewed optimism. With Joe Biden's election victory all but official, there's hope that a Democratic administration will bring the debate back on the agenda.
While there's no hard evidence Biden is any more lenient on marijuana legalisation than his predecessor, stock prices in Canopy Growth Corp jumped as much as 50% in the last 4 weeks and 20% in the last 5 days.
What are cannabis stocks?
Sparking a doobie without getting arrested seems to have been the biggest driver of pot stock prices over the last couple of years, but many cannabis companies aren't producers of marijuana (the part you smoke) at all.
Aside from recreational use, cannabis plants are used for medicinal and research purposes, while hemp (the non-psychoactive strain) is used in everything from food and beverages, clothing, beauty products and even building materials.
The differences between the three are important. For example, in Australia, medicinal cannabis was only legalised in 2016, hemp wasn't allowed until 2017 and recreational pot use has only been passed in the ACT as of January this year on a limited basis.
What are the best performing pot stocks?
Of the dozens of cannabis companies listed in Australia and around the world, many haven't recovered since the 2019 pot stock crash.
But while stringent rules might be a dampener on business, there's little doubt the legal cannabis sector will grow substantially over the next decade as legislation eases. By 2025, the industry is expected to be worth over US$38 billion, according to New Frontier Data.
If you're a believer, we've sourced some of the best performing weed stocks of 2020. We used eToro's handy CannabisCare portfolio to source top US listed medicinal cannabis stocks. And we sorted the best performers from our ASX-listed cannabis stocks list, which you can check out here.
- Market cap: US$197.893 billion
- YTD performance: -5.21% (+6% in the last month)
- Headquarters: Basel, Switzerland
- About: Novartis AG produces and develops healthcare products. It signed an agreement with Tilray Canada to distribute medical cannabis products globally in 2018.
- Market cap: $136.178 million
- YTD performance: 76.83%
- Headquarters: Northbridge, Australia
- About: Develops therapeutics for the treatment of skin diseases. The company also develops a cannabis-based pharmaceutical ingredient known as cannabidiol, which is used to treat epilepsy, pain, arthritis and schizophrenia.
How to buy cannabis stocks
To invest in the rise of cannabis, it pays to understand what part of the industry you're most bullish about. After all, a company that offers products like hemp soap alone might not see much of an impact simply because marijuana use is more widely legalised.
Once you've done your research and you understand the risks, you'll need to open a brokerage account. The platform you choose will depend on which market you plan to tap into. Planning on buying US stocks? You'll need to find a US broker, such as eToro, or an ASX broker if you're looking to buy Australian stocks.
Once you've chosen a share trading platform, you'll be able to search for the company name of your chosen pot stock or its stock code. Depending on the broker you choose, it might offer additional information about each company, including broker rating, price targets, dividend payments and debt-to-value ratio.
Your other option is to invest in an ETF that tracks a whole collection of cannabis stocks. Alternatively, eToro has a medicinal cannabis portfolio that you can also track.