The first half of 2019 delivered incredible wins for cannabis investors. Taking cannabis ETF Horizons Marijuana Life Sciences as a benchmark, we see that the fund, which is comprised of over 50 cannabis stocks varying in size, rose 37% already in 2019. And it's never too late to start cannabis investing! Because now, into the second half of the year, opportunity still abounds.
Importantly, the first six months highlighted the industry's key areas worthy of investment moving forward. So what are these areas that investors are going gaga for?
Canadian Cannabis Investing
The most obvious "wins" for investors came from Canadian cannabis cultivators and producers.
There were approximately fifteen Canadian cannabis cultivators whose stock more than doubled in the first half of 2019. In many of those cases, the shares ended the quarter between 50% and 65% higher. According to Yahoo Finance, "that's 20 out of 57 cannabis stocks rising by at least 50% in the first half of the year."
If that doesn't paint a picture of opportunity, I don't know what does.
Some particular standouts include popular brands Canopy Growth (TSX:WEED) (NYSE:CGC), Aurora Cannabis (TSX:ACB) (NYSE:ACB), Cronos Group (TSX:CRON) (NASDAQ:CRON), and HEXO (TSX:HEXO) (NYSE:HEXO).
Nobody is denying that many straight-up cannabis cultivator stocks returned well. However, the greatest returns in this industry actually came from other cannabis-relative sources, and this might surprise some investors.
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Cannabis Investing? Think CBD Extractors
Cannabis extractors showed themselves to be a more lucrative opportunity for investors than growers. The companies that extract CBD from cannabis and are often employed on a case-by-case basis returned massively to investors in the first half of 2019.
Extracting CBD has become a business mecca because the compound is used for the creation of cannabis derivatives such as oils, edibles, drinks, creams, tinctures, and so on. Extractions service providers were some of 2019's best performers with MediPharm Labs (TSXV:LABS) (OTCQX:MEDIF), Valens GroWorks (CSE:VGW) (OTCQB:VGWCF), and Neptune Wellness Solutions (TSX:NEPT) (NASDAQ:NEPT) among the 12 best marijuana stocks in the first six months. The return on investment from these brands are 217%, 188%, and 71% respectively.
There was another name high on the list too: Village Farms International (TSX:VFF) (NASDAQ:VFF), which was up 253%. This company straddles the line, being both a cultivator and an extractor. It has a joint venture with Emerald Health Therapeutics (TSXV:EMH) (OTCQX:EMHTF) called Pure Sunfarms, which cultivates 150,000 kilos of marijuana annually at full capacity. However, Village Farms' stock climb is attributed to its US hemp operations. With plans to plant 920 acres of hemp by the year-end for the purpose of CBD-extraction, Village Farms is poised to be an extraction leader.
Biggest Winners of All for Cannabis Investing: Cannabinoid-based Drug Developers
The greatest stock growth of the year so far came from Zynerba Pharmaceuticals (NASDAQ:ZYNE). These shares were up a whopping 358% in the first half of 2019. The small-cap pharma company is developing "a transdermal CBD gel known as Zygel for the treatment of Fragile X syndrome (FXS) and autism spectrum disorders (ASD)."
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Recently, the company returned positive results in a pivotal study, expediting the FDA's review of its experimental therapy. As such, Zygel may easily become the next cannabis-derived drug to receive FDA approval, and this has boosted shares dramatically.
Zynerba's success proves, where cannabis investors are concerned, that companies building in the field of cannabinoid-based medicines offer the most potential for investors in terms of sudden and sizeable returns.
GW Pharmaceuticals (NASDAQ:GWPH) is another such company that has returned 77% thus far in 2019. This is thanks to its cannabis-derived drug Epidiolex, currently the only drug of its kind approved by the US Food and Drug Administration (FDA).
So far, the company has reported $33.5 million in sales from Epidiolex this year. But sales are ramping up, and as they do, this pharma company may deliver even more to investors in the not-too-distant future.
Cannabis Investing Takeaway
The first half of 2019 shows that "building on the CBD craze" offers the most lucrative investment. Nobody can tell you exactly who will shine, but it's worth noting that companies developing medicines or CBD oil for derivative purposes have gained the most in 2019 so far.
Moving forward, it's safe to assume that this trend will continue. Especially if we consider that Canada is on the verge of legalizing cannabis derivatives, offering a whole new marketplace for these companies to sink their teeth into.
But what are your thoughts? Are you a cannabis investor with a successful investment of your own?
Featured Image: DepositPhotos © ra2studio
