CBD and legal cannabis are two of the fastest-growing industries in the world right now. More and more companies are producing CBD oil and other products thanks to the increased media attention and their popularity with consumers.
But if you are thinking about investing in CBD yourself, there are a few things you need to know. While the potential for large profits is one of the biggest factors for getting involved, there are some other factors to be aware of that could impact your success.
The cannabis industry has numerous niches and subcategories, each with their own appeal investors. So before you think about anything, here are 5 things you should know about investing in CBD in 2019.
1. CBD Is Different To THC
There are more than 110 different cannabinoids present in the marijuana plant. With that being said, only 2 are of major interest to researchers and the general wider public: CBD and THC.
Now, while they are both found in the same plant, they have some key differences you must be aware of.
Most importantly, THC is a compound with psychoactive properties, meaning that it’s responsible for getting you high. THC is commonly sought after to be used recreationally.
On the other hand, CBD does not have any psychoactive properties and is used for its perceived medical benefits. This makes CBD a hot product in the medical sphere so people buying it aren’t looking to get high. They will either be scientists using it for research or public customers seeking to relieve a medical issue.
Another key difference between the two is its legality.
THC is illegal at all levels in the US thanks to its psychoactive properties. On the other hand, not all CBD is illegal.
Cannabis is illegal at the federal level, so all extracts of this plant are also illegal. Some CBD products from cannabis are legal in some states that have passed laws for the medical use of marijuana, but transporting these products from state to state remains illegal.
However, President Trump signed the Farm Bill in 2018, making products derived from hemp legal at the federal level. The hemp plant has typically high concentrations of CBD and low concentrations of THC.
2. Investing In CBD Has Attractive Business Numbers
By 2022, the CBD market is expected to exceed $22 billion. This marks a huge increase from the $591 million in sales from 2018. This shows that while it’s still a relatively new industry, Wall Street is certainly keeping close tabs on it.
But the growth of the industry is not the only number to get excited about from an investing point of view. For example, the high margins are also attractive.
Think of it like this.
The handful of examples of recreational legal cannabis products in the US show that it’s likely to result in an oversupply of dried cannabis flower. This means cannabis growers must find a way to diversify their products to prevent their own margins from suffering. According to CTC, the commonly-used method they use is through CBD oil.
CBD products like CBD oil have a higher price point compared to that of the dried flower and consumers are more likely to pay for it. There are also fewer worries in terms of oversupply of CBD oil either, helping to preserve healthy profit margins.
3. There Is Only One FDA-Approved Use Of CBD
The above points are reasons to be excited about investing in CBD. This next one is important to know to pump the brakes.
There are many different benefits of CBD (check out this list), such as pain relief, reduced anxiety and soothing inflammation, but the FDA has only approved one medical application of CBD. All other ailments are not approved by the FDA.
The approved product itself is called Epidolex, a CBD-based oral drug used for treating two rare forms of epilepsy: Lennox-Gastaut syndrome and Dravet syndrome. Epidolex is produced by GW Pharmaceuticals and they report that their drug reduces seizure frequency in sufferers by between 30% and 40%.
4. FDA Crackdowns Could Still Happen
Per Daily Cbd Magazine, the 2018 Farm Bill has opened the door for CBD production as long as the CBD comes from the hemp plant. However, this has only seen the FDA become more aware of CBD products, with the organization threatening to crack down on the outrageous claims made by CBD companies.
This means that as an investor, you must be aware of all the ingredients that are going into your product and you are careful with your advertising and marketing campaigns. While there are studies that suggest it can help with certain conditions, you must not be jumping the gun and saying it can do this, that and the other without hard scientific evidence to back it up.
In recent times, Walgreens has added CBD-based products on its shelves, but outgoing FDA Commissioner Scott Gottlieb spoke at a House Appropriations Committee to express his concerns over the move. This shows that the FDA is not afraid to take action against a major retailer, meaning they won’t hold back against anyone.
5. Be Aware Of Charlotte’s Web
There are not many CBD pure-play stocks on the market, but the largest hemp-derived manufacturer by market share right now is Charlotte’s Web Holdings.
Before the Farm Bill was passed, Charlotte’s Web was still selling CBD products across the US. Now that it’s legal at the federal level to do so, it’ll be easier for this company to get more retailers to stock up on their goods.
Another reason to know about Charlotte’s Web is that they are one of the few pot stocks that are consistently profitable on an operating basis. Their high-margins sales enable combined with low costs mean that investors may struggle to find other stocks that bring about a better return.
If it’s your first time investing in CBD in 2019, Charlotte’s Web is the perfect place to start. From here, do your research and look into other opportunities to make an optimal return.