Could your investments get a new high from the legal cannabis market? As its uses grow, these firms are seeking to profit

The cannabis industry is predicted to be worth $57 billion by 2027¹ – but you don’t need to get involved in any illegal activities to benefit.

Most countries still ban the supply of cannabis for recreational use but many have legalised the plant in recent years for medical use.

This has given rise to innovative businesses offering products and research, so could your portfolio get a new high from the cannabis market?

Cannabis may be associated with the coffee bars of Amsterdam or university students getting high, but recently there have been more and more studies that also seem to purport its medical benefits, which is making the area more interesting for companies and investors.

The most common parts of a cannabis plant used are tetrahydrocannabinol (THC) and cannabidiol (CBD).

THC is banned in the UK, as it is a psychoactive chemical that makes people high.

However, cannabidiol, CBD or cannabis oil was legalised for medical use in the UK in 2018.

Supporters and medical professionals say CBD can provide relief for conditions such as epilepsy and multiple sclerosis².

This has given rise to other CBD oil-based products such as food, drinks, soaps and creams.

An accredited lab must verify that a CBD product has THC content of 0.2 per cent or less or it is deemed illegal in the UK.

Similarly, hemp, which comes from another type of cannabis plant, has low levels of THC and can be used to make fabrics in clothing.

Hemp clothing is legal in the UK but providers need a Home Office licence to grow it.

Across the pond, some US states such as New York have legalised cannabis for recreational purposes but some may only allow the use of CBD in medicine by licensed producers.

Hemp was made legal in the US in 2018 as long as it has THC content below 0.3 per cent and its growers need a licence.

Cannabis investment opportunities

More relaxed attitudes to recreational cannabis in some countries and a race to create and make products to support the medical benefits of CBD mean there are plenty of companies trying to grab a slice of what is becoming a multi-billion-pound market.

The Centre for Medicinal Cannabis claims the UK CBD market is currently worth £300 million and could hit £1 billion by 2025, as more research on its health benefits is revealed.

The market is expected to be worth $57 billion globally by 2027, according to research by Arcview Market Research and BDS Analytics, helped by more US states and other countries legalising it for recreational use.

Investors are also able to share in the success of some of these innovative cannabis-focused companies.

Investors need to be aware that this tends to be a highly speculative end of the stock market, with plenty of risks. They could find share prices soar, or their investment turns to ash.

As an example of some of the firms in the sector, here are some of the stock market-listed cannabis companies that you could add to your portfolio.

Amyris

Amyris is a biotech company that has been working on a Covid vaccine, but it is also a good example of how firms are moving into the cannabis market.

It uses biotechnology to create synthetic substances and renewable chemicals and is using this expertise to create synthetic cannabinoids for health and beauty products.

The company is listed on the Nasdaq and its share price is up 367 per cent over the past year, but down 17.75 per cent over a five-year period.

Aurora Cannabis

One of the best-known and largest manufacturers of cannabis products in the US and Canada is Aurora Cannabis.

It is listed on the Toronto Stock Exchange and the Nasdaq, serving both the recreational and medical markets.

The company has benefited from the legalisation of the retail sale of cannabis in Canada since 2018 and increasingly relaxed rules in the US but it has suffered from falling revenues in recent years.

The company’s shares are up 43.3 per cent over the past year but are down 64 per cent over five years. 

Canopy Growth Corporation 

Nasdaq-listed Canopy Growth Corporation was one of the first companies to trade and be licensed in the US, giving it a head start in the market.

Its market capitalisation is $6.4 billion and its share price is down 32.95 per cent over the past year but up 195 per cent during the past five.

Organigram 

This Canadian company specialises in medical cannabis.

It operates in Canada and exports internationally, with much of its work coming from supporting veterans and emergency services staff with conditions that can be helped with the product.

The company is also busy developing the next generation of CBD products, offering vapes, chocolates and powders.

The Nasdaq-listed firm has seen its share price rise by 76.7 per cent over one year and 2.1 per cent over five.

The Cronos Group

Canada is a big market for cannabis companies and The Cronos Group, which focuses on health products, ended the first quarter of 2021 with $1.2 billion in cash.

It is valued at $2.5 billion and while it has registered share price growth of 477 per cent over five years, it is down 9.2 per cent over the past year.

Tilray

Tilray was founded in 2013 and although based in Canada, it was the first licensed producer of medical marijuana to be certified by the European Medicine Agency.

The Nasdaq-listed firm has a valuation of £3.8 billion. Its share price is down 4.81 per cent annually and also has fallen 64 per cent over five years.

This reflects uncertainty over the direction of the company after it merged with another firm called Aphria in December 2020.