There are a number of different reasons why cannabis stocks have been hit particularly hard due to coronavirus.
Editors Note: This is a guest post by Maria Hills.
The coronavirus has had a big impact on the world’s economy, and even more so on the financial cannabis market. While the S&P Index has seen a 17% drop, various marijuana companies have experienced a drop of 30% and more. Of course, this raises the question of whether it’s a good time to buy cannabis stocks right now, and if there’s any chance of finding a bargain.
Covering Your Concerns
There are a number of different reasons why cannabis stocks have been hit particularly hard due to coronavirus. One of the biggest reasons is because they’re a high stakes investment, to begin with – it’s still rare for a marijuana company to turn a comfortable profit. This is also despite the fact that many American states have legalized cannabis. Another issue around investing in cannabis stocks is financing. No matter what the end of the tunnel looks like with coronavirus, one thing’s for sure is that they’ll be less investment channeled into asset classes like cannabis with a high risk. Cannabis companies were already having issues finding good investment sources before the outbreak hit.
There’s also the concern that the impact that the virus has had on China’s economy so far will spread its reach to the marijuana industry, too. Like many industries, the cannabis industry relies on China as the main manufacturing hub, especially when it comes to vaping products. The last reason why there is concern around an investment like this is consumer spending – or lack thereof. Many people will restrict spending on non-essential goods, which will hit industries like cannabis the hardest.
The Damage is Contained
For the most part, these concerns are so far exaggerated. While the legal environment in America still isn’t where it needs to be, more and more states are moving toward legalization, which is great news for the industry. As for China’s economy, there is more than one way to consume cannabis, so not all companies have to rely on China’s manufacturing facilities to keep producing their products.
When thinking about consumer spending, for some purchasing cannabis isn’t a non-essential – it’s an integral part of their medical management plan. The only real valid concern here is financing – there’s every chance that pot companies will continue to struggle to get the funding they need, which most rely heavily upon. If you can get over this little hurdle, though, purchasing cannabis stocks in a dip like this has every chance of paying off.
Investing in the Right Company
It’s not easy finding the right marijuana company to invest in, but one thing that you do want to figure out before you take the leap is that your finances are in order. If you need a bit of a boost to make the most of this opportunistic gap in the market, consider options like personal or title loans. Short-term loans like this are great for initial investments and can be paid back at your leisure. Ignore the fear-mongering in the media, and take the leap into what could end up being one of the most successful alternative medicine industries we’ve seen – ever.
This article originally appeared on Green Market Report.