The marijuana industry is currently one of the fastest growing in the United States. According to a 2016 Colorado Marijuana Enforcement Division revenues report, the industry is experiencing over 30% compound annual growth. Put differently, if you are a keen investor, you cannot afford to take the cannabis industry lightly. However, some cautions and tips are in order.
Avoid Direct Marijuana Interactions
If you want to avoid a lot of cannabis-related business investment risks, try and steer clear of being directly involved with cannabis. A smarter way of investing will be in ancillary companies like business intelligence solutions, IoT technology firms, and next generation marketing platforms involved in the provision of tools that assist the cannabis industry. Other hotbeds for cannabis industry ancillary products include marketing, advertising, distribution, agriculture tech, payment solutions, and business intelligence.
Steer Clear of Publicly Traded Companies
It is best to avoid marijuana companies that are publicly traded, and they are many! Previously, many of them ended up having problems with the US SEC for issues related to securities fraud. There are extremely few solid businesses in this growing sector, and identifying the most suitable one to invest in can be quite challenging. As an investor, your best bet is to go for privately-held companies as this means they are legit. You will, however, also need to be an accredited investor in line with the US SEC guidelines.
Check on Company Management
Investment gurus advise investors that if they really want to know more about a cannabis company, the best line is to simply get their phone number and call them. In case nobody ever answers or you only get a voice mail response or no one ever gets back to you, then that is certainly a bad sign. Check with credible websites such as Yahoo Finance to see whether the management is disposing any of their shares. If they have total confidence in their company, why would they be selling it?
Consult the MJIC Marijuana Index
New investors can easily access a company’s stock filings on the US SEC Securities Exchange site or any other publicly traded exchange sites. You can also find basic information on both Google and Yahoo finance pages. FlowerKist CEO, Barry Clark, advises investors to look at revenue figures and confirm that the company is actually making some money. Clark also suggests that you should review cannabis stocks that are listed on the MJIC Marijuana Index.
The US marijuana industry is highly-regulated, and for guidance, it may help you to look at several other highly regulated industries. Identify solutions being implemented by such regulated industries like insurance, alcohol, and prescription drugs for they could also be good investments for the cannabis industry.
The energy flowing from the marijuana industry is attracting a whole new breed of investors into the potentially lucrative pot stock market. You may want to play it safe and only focus on the technologies and services that are facilitating the success of these thriving cannabis companies. As the industry expands, the need for these services and products will also continue to grow regardless of the existing regulatory hurdles.