According to the results in Google Trends, worldwide searches for cannabis stocks have fallen dramatically in recent years. With investors practically falling over themselves before and during the initial days of Canadian legalization, the cannabis stock exchange today looks a lot different than it did in 2018.
With the Canadian market maturing and the US market still impatient for federal legalization, what is the investment outlook for cannabis in 2022? Most experts seem to agree that there are still significant risks associated with cannabis, but that could translate into big opportunities.
There are also hints that investments with medical marijuana and ancillary companies (those non-plant touching or cannabis-related brands), promise more security than their recreational counterparts.
Medical Cannabis Stocks May Offer More Stability in the Long Run
Although Canadian stocks may be stagnating after legalization in 2018, outlooks are a little better South of the border — but they are better still within the medical cannabis sector.
The medical or pharmaceutical cannabis sectors rely less on the ebbs and flows of market demands. As the pandemic taught us, when consumers have more time and funds on hand, they tend to splash out on non-essential products like adult-use cannabis. But, as California producers have become painfully aware, this growth isn’t sustainable.
As per the Motley Fool, the demand for medical cannabis has been stable from the start, despite the high variability elsewhere. Patients who rely on cannabis to reduce the symptoms of chronic conditions and disease don’t buy based on whims or excess income. Instead, their medical considerations remain a necessity, translating into relatively stable sales.
A few of the more prominent names in the medical cannabis space include Jazz Pharmaceuticals, which acquired GW Pharmaceuticals in 2021 and Trulieve Cannabis, a vertically integrated medical cannabis multi-state operator. Canopy Growth, a company spanning recreational and medical, has seen more volatility in its share price but is also routinely mentioned on medical cannabis’ “Best-of Lists.”
Medical Cannabis Benefits from an International Reach
The Motley Fool piece also points out that medical cannabis stocks have been less volatile because far more jurisdictions in America and beyond have legal allowances for it.
There have been significant regulatory changes opening up new medical cannabis programs like those seen across the European Union, in Germany, the UK, and France. The story is much the same in Asia, with South Korea and Thailand coming online in recent years.
Even more astoundingly are already substantial international exports of medical marijuana flower and concentrates moving around the world. Interestingly, the UK is the world’s largest medical cannabis exporter (perhaps problematically not available to its own citizens). In 2019 the UK produced and exported more than 320 tonnes of cannabis for medical and scientific uses.
Canada is a close second. In 2020, it exported over 7000 liters of cannabis extracts and 15,500 kilograms of flower. Israel, Germany and Australia are the largest buyers, with more markets coming online all the time. Unlike recreational cannabis, which is still seen as highly controversial in many countries, medical cannabis is increasingly legal and viable.
The Promise of Ancillary Pot Stocks
Another growing area of the cannabis market is the ancillary service sector. These non-plant touching but supportive industries provide the technology, infrastructure, software, and other resources needed in the cannabis sector but are not frustrated by anti-cannabis federal regulation. In fact, many serve other industries as well.
A few of the ancillary stocks that have been included in 2022 best-of lists include Chicago Atlantic Group, an investment firm offering financial services to the cannabis sector; Agrify Corporation, a vertical cultivation tech company; and Scotts Miracle-Gro Company, a long-standing fertilizer and soil supplier.
Biotech companies are another area to watch that falls under the same non-plant touching category. RYAH Group, Inc. (RYAH.CN) is one example. It has been engaged in developing and commercializing digital health solutions, including precision dosing devices for plant-based medicines.
As an emerging company, RYAH Group, Inc. has established itself as a leader in delivering innovative, user-friendly IoT devices in the plant-based medical industry. The company is already participating in one of the largest and most comprehensive clinical trials for cannabis with a UK partner.
RYAH benefits from its ancillary status but also from its value within medical markets. In fact, in March 2022, its Smart Inhaler system received a Health Canada Medical Device License, paving the way for medical approvals elsewhere.
2022 Cannabis Stocks: Cautious Optimism
In 2022, cannabis investments have cooled down from the peak in 2018. The recreational market remains volatile, but not every subsector is experiencing the same downturn.
Medical cannabis producers and cannabis-touching pharmaceutical companies are offering a bit of stability and remarkable potential in an ever-expanding international market. While everyone awaits big regulatory changes in the US, medical cannabis quietly plods forward.
Ancillary companies are also well-positioned to avoid the current pitfalls of national regulation and producer consolidation. Non-plant touching ancillary companies have the ability to pivot to less regulated industries and insulate themselves from the pitfalls of the cannabis market for 2022.
The industry has cautious optimism for the future, and growth is far from over.