An educational outlook on current investing strategies for a cannabis entrepreneur.
Now that discussion of stocks has taken over even the most obscure social media realms, we thought it was relevant to examine current cannabis stocks and investigate strategies as an entrepreneur in the industry. Our outlook at the moment is that cannabis investments are a high risk for those intending on investing a large sum of funds or a percentage of their portfolio. It’s pertinent, especially if you’re Black and believe in the culture of cannabis, to be aware of the foundation of the company you are wanting to invest in.
Like with any stock, you’re betting on the potential future performance of this company, and federal legalization plans have a long road ahead of them thus making it a volatile market. The Global Cannabis Stock index, started in 2013, is a great tool for assessing the performance of stocks thus far. It shows that for the last decade cannabis stocks have routinely under performed. Also, it’s quite clear that top financial analysts are unsure what affects this market and causes the sudden spikes in investment. We always encourage all our potheads to embark on your own research. However, it is of our opinion that the unpredictable fluctuations in the cannabis investment market are caused by the delayed and deprioritized policy reform related to cannabis and corporate restructuring that eliminates small businesses and diminishes reliable market competition.
Now you might disagree with us, and decide to invest, the next step would be researching the categories and types of companies that have gone public with their trading. Individuals coming from the culture side of cannabis may not want to back large pharmaceutical companies creating cannabis based products, as they have historically had a contentious relationship. However, someone looking to diversify their portfolio may be interested in getting in at the ground level of any cannabis industry associated stocks. Based on the current stocks available, we would categorize stocks in the cannabis space in six categories: Technology, Production (both medicinal and recreational), Pharmaceutical, Real Estate, and Auxiliary. It should be noted that while a particular company may have interest in the cannabis industry, the parent organization listed on the exchange may not hold cannabis at the core of their business model. In that case it would not be considered a pure-play stock. This difference could help entrepreneurs such as ourselves narrow down who we want to support vs watch in this long-term game. Again, researching these companies and learning how important cannabis is to them, will be beneficial to growing this industry in a way that supports us all.
2020 has shown that every aspect of every industry should be evaluated with a lense of social equity. It’s clear that cannabis is the newest industry to be cultivated. Given the effect that prohibition of cannabis has had, social equity should be built in its very foundation. With that we ask, are the companies listed on stock exchanges doing their part to aid those communities? The Morningstar Minority Empowerment Index is a great tool for assessing whether or not these companies have strong racial or ethnic diversity policies in place. The NAACP created a fund to track this index called the NACP and it is a great tool to cross-reference when researching potential investments. According to NAACP’s website, the fund was designed to provide broad equity market exposure to the U.S. Large and Mid-Cap companies that fit the NAACP’s vision of good corporate citizens.
Finally, Motley Fool has done a great job of analyzing the current status of investing in the cannabis industry and we highly recommend you follow the steps they suggest in your preparation process. Moreover, we suggest you reach out to those who have interest in cannabis and find ways to support your local market and/or activists. Pursuing ways to continue pushing cannabis-positive legislation does not always require risking a financial investment. There are many issues within the cannabis regulatory process that must be ironed out before an effective federal policy and legalization plan should be enacted. We believe you would be better off taking those funds and investing in how you can actualize your current skills/passion within the industry.