Cannabidiol, more popularly known as CBD, is amassing quite a lot of interest from both seekers of natural medicine and investors. Sanjay Gupta added to the steam (no pun intended) and popularity of this compound by creating and publishing a documentary called ‘Weed’. Gupta, the Chief Medical Correspondent at CNN, highlighted the great promise that surrounds the future of the compound. With the great potential of CBD becoming more and more understood by investors, many are looking to put their money into the industry. With the stock market performing great over the last decade, investors are approaching the market with much more confidence. Emerging markets always generate a lot of attention from investors. As an emerging market, the CBD industry presents incredible opportunities for portfolio growth. Before investing in anything, it is wise that you know what you are getting into. This article will serve as a guide to investing in CBD.
What is CBD?
CBD is a compound among other cannabinoids derived from the cannabis plant. Unlike THC, CBD does not give users psychoactive effects, neither does it alter the mind. CBD is found in both the marijuana plant and hemp. The first CBD drug production company to receive approval from the FDA is GW Pharmaceuticals. The product that was approved was their CBD drug Epidiolex which serves as a treatment for epilepsy. They made history in 2018 when they received this approval. Epidiolex still stands as the only CBD product that has received FDA approval.
CBD and the Law
In December of 2018, hemp was removed from the ban list of the Controlled Substance Act, after being on the list for almost 5 decades as a result of a decision made by President Richard Nixon in 1970. This legislative approval opened the gate to legal CBD production in the United States of America.
Where in America is CBD Being Produced?
Not all states in the U.S. have acted upon the Farm Bill of 2018 which made the production of CBD legal. 46 of the state in the United States have put laws in place permitting and managing the production of hemp. It has been reported by U.S. News that the total number of acres devoted to hemp production tripled in 2018. As of 2018, there are 78,176 acres of land being used to produce hemp. The two states that account for more than 50% of this number are Montana (22,000 acres) and Colorado (21,578).
CBD Industry Players
Two companies that are doing well at this time are Charlotte’s Web and CV Sciences. Both of these companies have a great reputation in the market in which they are operating, great financial progress and exceptional revenue and growth.
Charlotte’s Web was founded and is run by the Stanley Brothers of Colorado. These brothers were featured in the documentary done by Gupta in 2013. They have also been featured in the New York Times. This company is currently leading in the market. Here’s a look at their 1st quarter in 2020.
– Their organic consolidated revenue was $21.5 million in comparison to $21.7 million in the first quarter of 2019.
– They reported a gross profit of $15.0 million. This represented 69.8% of their consolidated revenue.
– Their report featured an adjusted EBITDA loss of $5.7 million.
– Charlotte Web reported that their direct-to-consumer (“DTC”) eCommerce sales increased by 29.4% year-over-year and has contributed to 65.6% of their revenue in the first quarter of 2020.
– As of March 31, 2020, The company has $53.0 million in cash and $114.9 million working capital.
Here’s a look at CV Science’s financial report for the first quarter of 2019:
– The company reported a revenue of $8.3 million for the first quarter of 2020.
– They experienced a 9% growth in e-commerce sales which represents 24% of their total net revenue. This is up from 15% for the first quarter of 2019.
– The company experienced a gross margin of 48.5% for the first quarter of 2020.
– The company was able to maintain a strong total cash balance of $7.6 million in the first quarter of 2020 while operating without debt.
Another top member of the industry is Elixinol Global. Many investors have their eyes on this company.
How to Invest in CBD
Many companies are producing such things as CBD edibles, CBD drinkables, CBD oils and host of other CBD-related products. You might be wondering how to go about investing in CBD. Let us take a look at some of the available options.
Invest in a CBD Company
If you have experience with investing and are knowledgeable of the process of investing, you could invest in small CBD companies. If you are business savvy and are able to find the capital, you could consider starting a CBD firm of your own.
Purchase Shares in CBD Companies that are Publicly Trading
One of the quickest ways that you can get involved in CBD investments is by purchasing stocks in a publicly-traded company that is already involved in the production of CBD oil, CBD edibles or some other CBD-based product. Investing in this way relieves you of the responsibility of having to be involved in the daily operation of the firm.
Investing in Alternative Firms/Industries
While some companies are not completely CBD production companies, they produce or distribute products that contain CBD. Some companies you could consider investing in are:
– Coffee Shops
– CBD Edibles Brands
– CBD Drinkable Brands
– CBD Marketing and Consultancy Services
The investment opportunity that CBD currently provides and may provide in the future, makes it an interesting industry to watch. We recommend that you continue to educate yourself about the compound and the industry as you position yourself to invest in CBD. The market continues to grow, and the forecasts are looking very enticing; however, take Warren Buffet’s advice in doing your homework before putting your money into any stock.