Investing in cannabis stocks can be controversial in the eyes of both the investment community and society at large. As it turns out, the stigma surrounding marijuana doesn't exactly paint these stocks in the best light.
But controversy aside, the cannabis industry is creating some interesting opportunities for investors. More companies are using this young commodity to develop medical and consumer healthcare products. As a result, market forecasts indicate the potential for explosive growth over the next decade.
With that in mind, let's dive into the world of UK cannabis stocks and see which businesses are leading the charge.
What are cannabis stocks?
As the name suggests, cannabis stocks consist of any business that uses marijuana to create legal products for other businesses or consumers. Although this field is still in its infancy, it can be divided into three main categories:
Growers and Retailers – Businesses that create consumer products using cannabis. Medical – Pharmaceutical and biotechnology companies that create medicinal marijuana products for patients. Auxiliary – A group that provides products or services to other cannabis businesses.
As a result, this young industry produces a vast array of products, including food, beverages, lotions, oils, perfumes, and pharmaceuticals, to name just a few.
Typically, products with this many uses do not have high barriers to entry. But when it comes to marijuana stocks, it's a completely different story. The regulatory environment surrounding cannabis in most countries is understandably strict. And the UK is no exception.
Most cannabis-based products require regulatory approval before being sold to consumers. Medical cannabis companies in the UK will also need additional approval from the Medicines and Healthcare products Regulatory Agency (MHRA), which can be time-consuming and costly.
Needless to say, this increases your risk profile. And after that, cannabis stocks are often synonymous with volatility. But there's also talk of huge growth potential, and the risk could come with higher rewards for investors.
With that in mind, here are five of the UK's leading marijuana stocks, ordered by market capitalization.
Top share of marijuana in the UK
The top shares of cannabis in the UK are:
Company Category Description Associated British Foods (LSE:ABF) Producer and Retailer One of the UK's largest licensed hemp plant growers. Futura Medical (LSE:FUM)Medical A pharmaceutical group that develops cannabis medical products in cosmetics and painkillers. Deepverge (LSE:DVRG) Ancillary biotech group company provides lab-grown tissue samples to test skin care products. Kanabo (LSE:KNB) Medical sells medical-grade vaping devices for the precise and controlled prescription of medical cannabis to patients. Personal Goods (LSE:CBX) Producers and Retailers Businesses that sell consumer products for early stage wellness skin care and pain relief purposes.
Related British Cuisine
Associated British Foods is a relatively unknown cannabis stock. After all, the company is the company behind many popular food brands, including Kingsmill bread and Blue Dragon cooking sauce. It is also the parent company of clothing retailer Primark.
However, in 2017 the group's subsidiary British Sugar entered into an agreement with GW Pharmaceuticals to supply M250 marijuana for drug development purposes. M250 contains high concentrations of the active ingredient cannabidiol without causing psychoactive effects. In other words, the plant cannot be harvested for recreational cannabis purposes.
Associated British Foods has since converted approximately 45 acres of tomato greenhouse space to growing hemp plants, making it one of the UK's largest licensed growers.
Futura Medical
Futura Medical is a pharmaceutical company in the early stages of research and development. The group focuses on new treatments aimed at sexual health and pain relief using its proprietary DermaSys technology.
This allows active pharmaceutical ingredients to be formulated into a gel and absorbed directly through the skin. As such, this is a highly targeted solution that has proven successful with its flagship products, MED3000 Erectile Dysfunction Treatment and TPR100 Nonsteroidal Anti-Inflammation Treatment.
But as it turns out, DermaSys is fully compatible with cannabidiol. The company then began developing a new gel called CBD100 in a joint venture with CBDerma Technology. Although still in the early stages of development, early laboratory tests have shown promising results for this up-and-coming cannabis strain.
As a result, management began exploring commercialization options for new beauty, skin, and pain relief treatments using cannabidiol as a key ingredient.
deep barge
Deepverge is a vertically integrated human skin testing technology specialist. Labskin, a proprietary platform, grows tissues that mimic the naturally occurring microbiome of good and bad bacteria found in the real world.
Skinlab allows cosmetic, pharmaceutical, and other healthcare companies to test consumer products on human-like skin in a real-world environment without exposing individuals to potential health risks.
As new cannabidiol oils and skin care products are introduced to the market, the group's technology for testing these products is in high demand. In recent years, Deepbarge has signed agreements with various leading European beauty, household and hygiene product manufacturers to incorporate cannabidiol into their product portfolios.
The company sells several cannabis-based products, including pain creams and wound dressings, but the cannabis stock's long-term strategy is to offer Labskin as a service to the cannabis industry and healthcare sector in general. It's about focusing. .
Kanabo
Kanabo is a manufacturer and retailer of cannabidiol-based products for the health and wellness consumer sector. Alongside this retail activity, the cannabis stock has also designed its own medical-grade inhalation system called VapePod.
The device consumes the company's cannabis oil cartridges and delivers highly precise doses to patients. This provides a controlled and safe way to prescribe medical cannabis to people suffering from chronic pain, sleep disorders, and anxiety attacks caused by post-traumatic stress or compulsive sexual behavior.
After the successful completion of the pilot program, management began increasing production capacity, extending supply lines and making strategic acquisitions within the European market.
Personal items
Cellular Goods is an early stage wellness business offering a variety of cannabidiol products. The company's three main product lines include anti-aging face masks for skin care, topical roll-on athletic gels for muscle recovery, and a recently launched ingestible collection to improve sleep patterns.
Unlike most product manufacturers in the industry, Cellular Goods does not use cannabidiol extracted from the hemp plant. Instead, cannabis stocks use synthetic preparations that are produced in a laboratory. This unique approach makes this group less susceptible to agricultural disturbances and at the same time more ecologically sensitive.
Investing in the US cannabis industry
American cannabis stocks must navigate a more complex regulatory environment. Currently, 37 states have legalized marijuana for medical purposes, and 18 states have legalized marijuana for recreational purposes as well. However, at the federal level, they remain controlled substances, severely limiting the geographic expansion of these businesses.
In April 2022, the U.S. House of Representatives passed a new bill legalizing cannabis at the federal level. The bill now heads to the Senate, where it will either be defeated or signed into law. If successful, the U.S. cannabis industry could boom.
Here are some major American cannabis stocks in order of market capitalization:
Jazz Pharmaceuticals (NASDAQ: JAZZ) Scotts Miracle-Gro (NYSE: SMG) Innovative Industrial Real Estate (NYSE: IIPR) Hydropharm Holdings Group (NASDAQ: HYFM) Grow Generation (NASDAQ: GRWG)
Are Cannabis Strains Right for You?
Just looking at these five cannabis stocks will likely leave investors who have bought comparable positions in each over the past five years very disappointed. That's because these stocks are down more than 60% in total.
It's not really surprising that an unproven industry performs so poorly. And it shows the risks of being an early investor. As such, investing in marijuana stocks may not be suitable for everyone.
That being said, industry forecasts are for significant growth over the next decade. If these prove accurate, the cannabis market could become an explosive opportunity for risk-seeking investors.
We recommend taking a multifaceted approach. At this stage, it is quite difficult to judge which companies will become the giants of the future. And having a collection of promising businesses increases the odds of finding a winner.
