Cannabis is giving a whole new meaning to the phrase growing money on trees, or plants in this case.

With the legalisation of cannabis in Canada and ten US states, cannabis companies Canopy Growth, Cronos Group, Tilray, Aurora Cannabis and Aphria have become the stocks to watch on US exchanges in 2018. This year, another Canadian company, CannTrust, has joined ranks.

Since then, the stocks for Canopy Growth has grown more than 65% and stocks for Cronos has gone up more than 115%.  US wealth advisor Carol Pepper of Pepper International has let on that if you are looking for something that is growing rapidly and is legal as well as properly controlled, you might want to keep your eye on this.

She dismissed the notion that the growth of the Cannabis stocks would be similar to the rapid growth and fall of Bitcoin. The cryptocurrency spiked at $19,000 at its peak but is now traded around $3,940. She did not think a similar situation will happen, as cannabis is a real product with tangible benefits. Its benefits are being closely studied with more products being churned out.

Why is there a demand for cannabis?

If you are pondering the reason for the boom, it is simply because the plant has enormous possibilities for medical use, giving way to predictions that this may very well be driving the next huge growth area in the stock markets.

A study done by Cowen & Co estimated cannabis sales could reach $80 billion by 2030 in the US if the Federal government legalised the plant. As cannabis is legal in Canada, the sales are predicted to reach $4.34 billion this year. In fact, it may exceed expectations as more growth is expected with cannabis companies alleging that plant could eventually replace drugs like sleep aids and pain meds.

Although cannabis is still banned by the US Federal government, as legalisation spreads across the US and Canada, the black market is slowly diminishing. Instead, now there are big farms and sophisticated dispensaries that produces cannabis-infused drinks, nasal sprays, lotions, gels and vapes.

Even the Oscar gift bag this year was laden with a wide variety of cannabis products, from chocolates to CBD-infused anti-ageing treatment.

But, will it eventually come to a halt?

The Food and Drug Department has started its crackdown, as products of cannabis are yet to be tested or approved by the Federal department. In New York City, the Department of Health ordered a ban on cannabis-infused edibles in restaurants, bars and other venues in February this year, as the edibles were deemed not safe as a food additive.

So, should you invest?

Some caution is advised if you are interested to invest here. Be wary of unlicensed sellers, guaranteed returns and signs of excessive hype. Last year, a Texas investment fund and its founder has been charged by US Securities and Exchange Commission for defrauding investors with false promises of huge returns in cannabis-related businesses. He had used the money to buy designer clothes and luxury cars as well as to pay early investors to keep up the scheme.

A thorough check the background, registration and license status of anyone recommending marijuana-related investments is prudent to prevent falling prey to such schemes.

If you are planning to sample the cannabis products, do check if the products come from reputable companies to experience its benefits without any negative side effects. Also do make sure that you are in a place where it is legal to do so.

Source: CNBC

Images: Stock photos