In today’s Exponential Investor:

  • To CBD or not to CBD
  • About CBD
  • How to ride the CBD trend

What classifies as a CBD investment?

In real estate circles, CBD often stands for Central Business District. Think of “Downtown” in a lot of cities in the United States or the historic hearts of many places in the UK.

In the context of this edition of Exponential Investor, though, CBD stands for cannabinoid. This is a compound found in the cannabis sativa plant, where “weed” or “pot” comes from.

Since the 1970s, cannabis has received a bad name and has been made illegal in many jurisdictions.

Because of this, CBD has been caught in the swathe of negative press around cannabis.

Much misinformation surrounds CBD. For example, one myth about CBD oil is that it can make you high.

Where CBD and conventional cannabis differ is the amount of tetrahydrocannabinol (THC) in them. THC is the psychoactive compound found in cannabis that can make you “high”.

In CBD products, the maximum legal amount of THC content allowed in the UK is 0.2% per product. As a result, CBD products are subject to rigorous testing phases.

CBD products come in several forms, including oils, capsules and sprays. You can buy them over the counter in store or online, in stores such as Holland & Barrett and Boots.

CBD companies are involved in one or more or three activities: selling and marketing these products; testing and distributing CBD products; and cultivation of cannabis to be used in CBD products.

CBDs are widely touted as a quick fix for many mental and physical ailments, including anxiety, epilepsy and back pain.

They’ve gained huge popularity over the past two years. CBD companies are starting to dominate the medical and economic landscape.

For example, Tilray is a CBD giant. It cultivates, distributes and produces CBD and medical cannabis for thousands of pharmacies and hospitals.

It has a market capitalisation of just under $2 billion and earned more than $200 million in revenue in FY 2022.

Why is CBD a good investment?

The global CBD industry is booming. It is predicted to increase from $12.8 billion in 2021 to $56.3 billion in 2028.

With the narrative towards cannabis starting to change, and more governments legalising cannabis, the CBD industry is benefitting.

For example, governments in Canada and the United States are a lot further down the track than most in terms of weed legalisation. Cannabis is legal in Canada and in 19 US states. Both countries have had thriving cannabis and CBD markets for years.

Now, Europe is starting to catch up, with more European countries now legalising cannabis. For example, Malta’s became the first European Union (EU) national government to legalise cannabis in December 2021.

This is helping fuel growth in the European CBD industry. The industry is projected to grow from $4.5 billion in 2021 to $25.8 billion in 2027.

With its proven health benefits, CBD oil is proving to be hugely valuable to the world. This is especially so at a time where healthcare systems are still under strain from pandemic backlogs.

In fact, around 11% of us use CBD products here in the UK, so its viability is clear to see.

Is it a good idea to invest in CBD?

In our view, CBD companies should make up part of your portfolio.

When you consider the money circulating around the industry, its health benefits, and the changing narrative towards cannabis, we think it’s an opportunity that shouldn’t be ignored.

What CBD companies can you invest in?

When investing in CBD companies, it’s useful to invest in companies with a strong track record of fundamentals. This includes consistent revenue growth and minimal debt.

Be aware that many of the larger CBD players, which tend to be based in the United States and Canada, also cultivate medicinal and recreational cannabis. This is on top of CBD product ranges.

So, there is a strong overlap between cannabis and CBD, but this shouldn’t put you off.

There are a plethora of publicly listed CBD companies, with many of these being early stage. Naturally, these companies bring a high level of risk, and in an increasingly competitive market, going for the larger players – with market capitalisations of at least $250 million – is perhaps wiser.

In addition, companies with relevant CBD certifications also give them a competitive advantage. In a landscape that is facing increased regulation, it’s the companies that have the licence to produce and market cannabis products that will thrive. Those that don’t could not only face fines, but see their goods taken off the shelves.

For example, Tilray is a GMP-certified medical cannabis producer. This means it has compliance with the highest CBD manufacturing standards.

Diversity in product range is also good. For example, Canopy Growth produces and sells recreational and medicinal cannabis.

It also has a varied range of CBD offerings. This includes CBD oils, edibles and soft gels.

As always, it is important to do due diligence before investing.

Until next time,

Elliott Playle
Contributing Editor, Exponential Investor

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Today at 4pm, Sam Volkering is going to reveal exactly why this September date is so significant…. he will show you everything you need to know to get ahead of the seismic change and reveal how you could take maximum potential financial advantage of it. Keep your eyes out for an email at 4pm today!

Forecasts are not reliable indicators of future results