As a newbie investor, you might be surprised to learn that you can now buy shares in companies that operate in the legal cannabis industry. Generally speaking, these are firms that service the medical marijuana sector – which covers everything from growers, distributors, and R&D firms. Although both the medical and recreational cannabis space is still in its infancy, it is already a multi-billion pound industry that is expected to grow year-on-year for the foreseeable future. So, are you looking to invest in the best cannabis stocks?
If so,, this guide will tell you everything you need to know. Not only do we explore the best cannabis stocks to keep an eye on, but we also review the best UK stockbrokers and show you what you need to do to buy cannabis stocks today!
What are Cannabis Stocks?
As the name suggests, cannabis stocks are publicly-listed companies that operate fully, or partially, in the global marijuana industry. Before we go any further, we should make it clear that the investment side of things is based solely on legal cannabis.
This will cover two sectors in particular – medical cannabis and recreational cannabis. As we cover in more detail later on, the former is prevalent in dozens of countries around the world.
And the latter, recreational cannabis, has since been legalized in just two countries – Uruguay and Canada (legal distribution and sales). This is also the case in several US states. Nevertheless, from your perspective as an investor, you will be buying stocks in companies that are involved in the legal side of the industry.
In theory, as more and more countries and states around the world continue to relax marijuana-consumption laws, the value of cannabis stocks should follow suit. As os 2020 the cannabis black market still outweighs the legal side of the space by a significant distance. But, if and when additional countries join Uruguay and Canada, a potential sea-change could be in the making.
What is the Difference Between Medical and Recreational?
As we discussed in the section above, there are two sectors that cannabis stocks operate in – medical and recreational. If you are contemplating adding some cannabis stocks to your share portfolio, it is crucial that you understand the difference between the two.
As the name suggests, ‘medical’ cannabis is supplied by pharmacies and medical centres. The end-user must obtain a prescription from a qualified doctor. Typically, a doctor would prescribe medical cannabis in direct response to a pre-determined illness (whether physical or mental).
The medical side of the cannabis industry is now prevalent in dozens of countries. Whether that’s in Europe, Thailand, Chile, or Zambia, more and more jurisdictions are beginning to relax laws on medical-related usage.
As the name also suggests, ‘recreational’ cannabis is purchased and consumed recreationally. That is to say, there is no requirement to obtain a prescription from a qualified doctor, nor does it need to be collected from a pharmacy. Instead, cannabis can legally be sold across licensed dispensers.
With that being said, the only countries that have legalized the recreational sale and usage of cannabis are Uruguay and Canada. Several states in the US have since relaxed laws too. Crucially, those holding cannabis stocks will be hoping that more and more nations follow suit, as this could open the doors to unprecedented growth.
What Types of Cannabis Stocks Can I Buy?
There are generally three types of companies that operate in the cannabis stocks and shares space: growers, R&D firms, and those supporting ancillary services (packaging, distribution, etc.).
The largest segment of the cannabis stocks arena is controlled by ‘growers’. Put simply, these are companies that have the legal remit to grow cannabis, and then sell their produce on to the secondary markets. This will either be to medical cannabis suppliers or licensed recreational dispensers.
An example of a leading cannabis growing company is that of Canopy Growth Corp – which is publicly listed on the Toronto Stock Exchange.
There are several Research and Development (R&D) firms that are now active in the legal cannabis industry. The overarching objective of said firms is to bring new cannabis-related treatments to the market. An example of an R&D firm active in the legal cannabis space is that of GW Pharmaceuticals, which is listed on the NASDAQ.
The third sector that is heavily involved in the cannabis space centres on ancillary services. These are companies that service growers and R&D firms. This could be a firm that sells the equipment required to grow cannabis or even the packaging for third-party dispensers.
How do you Make Money From Cannabis Stocks?
If you add cannabis stocks to your portfolio, you will make money in the same way as you do when investing in any other share types. That is to say, you stand the chance of making money when the value of your shares increase, as well as through dividends.
Much like any share investment, the long-term objective is to sell your cannabis stocks at a higher price than you originally paid.
- Let’s suppose that you bought $10,000 worth of shares in Canadian grower Canopy Growth Corp in 2015
- Back then, you would have paid just $2 per share
- This means that you purchased 5,000 shares
- In 2018, those very same shares were priced at $60 per stock
- Had you then sold your shares, your investment would have been worth $300,000 ($60 x 5,000 shares)
All in all, you would have made a very substantial profit of $290,000. While there is no guarantee that your cannabis stocks will increase to this extent, this is a prime example of just how young the industry is. In other words, you stand the chance of investing in an industry that is still in its infancy, so the upside potential is huge.
As cannabis stocks are operating in a new arena, very few companies pay dividends. This is because profits are typically reinvested in the growth of the firm. If dividends stocks are what you are after, you might need to look at a different sector.
Hot Cannabis Stock Picks for 2020
To give you an idea of some of the firms active in the cannabis stocks space, below you will find a selection of publicly-listed companies that you can invest in today.
1. Canopy Growth Corp
As noted earlier, Canopy Growth Corp is a Canadian-based cannabis grower. The firm has grown to exponential heights since its public listing, where you could have got your hands on its share at just $2. Although the firm has hit heights of over $60 per share, its stock price has since retracted.
At the time of writing, it is hovering within the $20-$24 range. Some would argue that this gives you the opportunity to buy the shares on the cheap. After all, with a market capitalization of just $8 billion, the upside potential is substantial. If you do want to buy these shares, which are considered among the very best cannabis stocks, Canopy Growth Corp is listed on the Toronto Stock Exchange.
2. GW Pharmaceuticals
GW Pharmaceuticals is a UK-based pharmaceutical company that is heavily vested in the cannabis space. More specifically, the company seeks to bring new treatments to the market that are sourced from cannabis plants. GW Pharmaceuticals has since obtained approval from EU regulators on its ‘Epidyolex’ drug that seeks to treat rare forms of seizures.
This makes it the first pharmaceutical company in the world to obtain regulatory approval for a cannabis-derived treatment. Much like in the case of Canopy, GW Pharmaceuticals has experienced rapid growth in recent years. In fact, its stocks would have cost you just $10 back in 2012. Fast forward to mid-2020 and the same stocks are now priced at $120.
If you do want to buy shares in GW Pharmaceuticals, you will need to use a broker that gives you access to the NASDAQ.
3. Trulieve Cannabis Corp
Trulieve Cannabis Corp is yet another of the best cannabis stocks that is listed in Canada. Only this time, you will need to find a broker that gives you access to the Canadian Securities Exchange. The company is essentially a holding group for heaps of small-to-medium subsidiaries that are involved in the legal cannabis arena.
This includes everything from growers, distribution, consumer sales, and medical supply. The stock was only publicly-listed late 2018, so you still have a chance to get in super-early. This translates to a minute market cap of just 1.86 billion – so arguably, the company is just at the very start of its journey.
What is a Cannabis Stock ETF?
There are plenty of public companies that are active in the global cannabis space, many of which are just a few years old. With that being said, this does make it difficult to know which stocks to buy. This is especially the case if you do not know how to pick stocks on a DIY basis.
If this sounds like you, it might be worth considering a cannabis ETF. In a nutshell, ETFs are tasked with tracking a group of assets. The provider behind the ETF will typically purchase shares in the companies it is tracking, which in this case, will be a basket of firms present in the cannabis industry.
Then, by investing in the said ETF, you will be buying shares in a full range of different cannabis stocks. Best of all, you will get to do this through a single investment, as opposed to needing to buy and sell lots of different shares.
Horizons Marijuana Life Sciences ETF
The most prominent cannabis ETF is that of the Horizons Marijuana Life Sciences. The ETF in question tracks 10 different companies from a variety of cannabis-related sectors. This gives you the best chance possible of diversifying across the wider cannabis industry.
Below you will find a breakdown of the stocks currently held by the Horizons Marijuana Life Sciences ETF.
|GW PHARMACEUTICALS PLC .||13.61%|
|CANOPY GROWTH CORP .||12.91%|
|CRONOS GROUP INC .||12.14%|
|APHRIA INC .||9.56%|
|SCOTTS MIRACLE-GRO CO/THE .||8.87%|
|INNOVATIVE INDUSTRIAL PROPERTI .||8.11%|
|TILRAY INC .||5.22%|
|AURORA CANNABIS INC NEW||4.80%|
|CHARLOTTES WEB HOLDINGS INC .||4.44%|
|ORGANIGRAM HOLDINGS INC .||2.18%|
If you do want to invest in the Horizons Marijuana Life Sciences ETF – you will need to find a broker that gives you access to the Toronto Stock Exchange,
An alternative cannabis ETF that is worth considering is that of the THCX ETF by Innovation Shares. This particular ETF takes diversification to the next level, as it gives you access to 30 different cannabis-related companies through a single trade.
Below you will find its full basket of companies as of mid-2020.
|Cronos Group Inc||7.02%|
|GW Pharmaceuticals PLC||6.43%|
|Canopy Growth Corp||6.26%|
|Scotts Miracle-Gro Co/The||5.81%|
|AURORA CANNABIS INC||5.04%|
|Charlottes Web Holdings Inc||4.76%|
|Village Farms International Inc||4.37%|
|Valens Co Inc/The||3.34%|
|Neptune Wellness Solutions Inc||3.06%|
|Canopy Rivers Inc.||2.98%|
|MediPharm Labs Corp||2.49%|
|FIRE AND FLWR CORP.||2.29%|
|Greenlane Holdings Inc||1.90%|
|Corbus Pharmaceuticals Holdings Inc||1.57%|
|Auxly Cannabis GroupInc||1.51%|
|Cara Therapeutics Inc||1.51%|
|Aleafia Health Inc||1.47%|
|New Age Beverages Corp||1.10%|
|Supreme Cannabis CoInc/The||0.88%|
If you do want to invest in the THCX ETF, you will need to find a broker that gives you access to the New York Stock Exchange.
How to Buy Cannabis Stocks Today
So now that you have a bit of background on what cannabis stocks are, we are now going to walk you through how to invest in stocks of cannabis companies.
Step 1: Find a UK Broker That Offers Cannabis Stocks/ETFs
Your first port of call will be to find a reliable UK stockbroker that lists your chosen cannabis stock or ETF. Crucially, as many cannabis stocks are either listed in Canada or the US, you need to ensure that your chosen broker gives you access to international shares.
There are many other metrics that you need to look out for when choosing a broker, such as:
- Is the broker regulated by the Financial Conduct Authority?
- What payment methods does the broker support?
- What fees and commissions will you need to pay to buy Cannabis stocks?
- What is the minimum deposit and investment threshold?
- Is the broker suitable for newbie investors?
To help point you in the right direction, below you will find a couple of brokers that allow you to buy cannabis stocks and ETFs with ease.
1. eToro – Best All-Round Stock Broker to Buy Cannabis Stocks (Commission-Free)
eToro is a new-age stock broker that tailors its trading platform to newbie investors and offers access to many of the best cannabis stocks. This includes popular Canadian grower Canopy Growth Corp as well as cannabis ETFs such as the Horizons Marijuana Life Sciences at the click of a button.
eToro allows users to both buy stocks in the traditional sense and trade CFDs. By trading CFDs, you can short sell stocks (speculate on prices going down), and make larger traders with up to 1:20 leverage. Best of all – and regardless of whether you opt for stocks or ETFs – eToro does not charge any share dealing fees or commissions.
Furthermore, eToro has a really low minimum investment threshold in place – which stands at just $50 (about £40). This is ideal if you are just starting out in the stocks and shares space and you want to begin with smaller amounts. You can also use the demo account, which is helpful if you’re a beginner wanting to learn how to buy cannabis stocks without risking your money.
One of the standout features of eToro is that it is a social trading broker that allows you to interact with other users. This broker also offers copy trading tools, meaning you can copy the portfolio of other investors. This essentially allows you to invest in the best cannabis stocks without doing any of the work – all you need to do is select a trader to copy.
When it comes to the safety of your funds, eToro is regulated by the FCA, ASIC, and CySEC. There is a minimum upfront deposit of $200 (about £160), and you will incur a small 0.5% conversion fee. This is because eToro accounts are displayed in US dollars. Withdrawals come at a small fee of $5.
- Social and copy trading tools
- Buy stocks without paying any commission or share dealing charges
- 800+ stocks listed on UK and international markets
- Accepts PayPal
- Mobile investment app
- Regulated by the FCA and other leading bodies
- Not suitable for advanced traders that like to perform technical analysis
67% of retail investor accounts lose money when trading CFDs with this provider.
2. Plus500 – Low Cost CFD Broker with Cannabis Stocks
Plus500 is a UK-based broker that operates purely in CFDs. This means that, while eToro supports the purchasing of stocks, on Plus500 you can only trade on the price of cannabis stocks without actually owning the assets.
This leading CFD broker offers trading for some of the best cannabis stocks, including Canopy Growth Corp and GW Pharmaceuticals. One of the best things about Plus500 is it’s very low fees.
When you trade CFDs with this broker, there’s no commission to pay and the spreads are some of the lowest in the industry. On top of that, there are no banking fees either, making Plus500 one of the most affordable brokers around. Plus500 offers up to 1:5 leverage on stock CFDs.
You need to make a £100 minimum deposit to get started, which is relatively low in comparison to other brokers, or you can trial the demo account which automatically replenishes whenever you run out of funds.
Want to trade cannabis stocks on your mobile? If so, you can use the excellent Plus500 mobile trading app for iOS and Android devices. Finally, this broker is regulated by the FCA and several other leading bodies, so you can be sure it keeps your funds safe and secure.
- No commission and low spreads
- Over 2,000 financial instruments
- £100 minimum deposit
- Accepts PayPal
- FCA regulated
- Mobile trading app
- Only offers stock CFDs
- Lacks advanced trading tools
72% of retail investors lose money trading CFDs at this site.
3. IG – Trusted UK Stock Broker With Competitive-Fees
An additional option that you have at your disposal in your pursuit of cannabis stocks is that of IG. The UK-based broker was launched in the early 1970s, and it is licensed by the FCA and ASIC. The platform is popular with UK investors because it permits access to over 10,000 companies.
This means that you will be able to easily buy cannabis stocks that are listed overseas. IG charges a flat-fee commission structure, which starts at £8 per trade. You will pay this again when you decide to sell your cannabis stocks.
You can reduce this to £3 per trade if you made three or more investments within the prior 30 days. You will also have access to ETFs at IG, so you can diversify with ease. IG supports UK debit and credit cards for an instant deposit, and accounts take just minutes to set up. The only downside to IG is that it charges a 0.5% and 1% transaction fee when using a MasterCard or Visa.
One of the best things about IG is that it offers a variety of investing and trading options. As well as buying stocks in the traditional way, you can also trade stock CFDs as well as spread betting, the latter being a tax-free alternative to regular methods of stock trading.
IG offers users a choice of different platforms. If you’re looking for a more user-friendly platform, you can opt for this broker’s own proprietary trading software. Alternatively, IG supports MetaTrader 4 and ProRealTime, both of which provide access to an array of advanced tools.
- Trusted UK broker with a long-standing reputation
- Good value share dealing services
- Leverage and short-selling also available
- Spread betting and CFD products
- Access to UK and international markets
- Great research department
- Minimum deposit of £250
- US stocks have a $15 minimum commission
Stet 2: Open an Account and Upload ID
Once you have chosen a suitable broker that lists the cannabis stocks you wish to invest in, you will then need to open an account. The process remains largely the same regardless of which broker you use, as you will need to provide a range of personal information.
- Full Name
- Home Address
- Date of Birth
- National Insurance Number
- Contact Details
You might also need to provide some information about your net worth and historical trading experience. UK brokers that are regulated by the FCA are also required to ask you for some ID. This is to ensure it complies with anti-money laundering laws.
As such, you’ll need to upload a copy of your:
- Passport or driver’s license
- Proof of address – Utility bill or bank account statement
Step 3: Deposit Funds
Once you have opened an account and uploaded your ID, you will need to deposit some funds. Be sure to check what payment methods the broker supports, and whether or not any deposit fees are applicable. If opting for popular broker eToro, you can deposit funds with a debit/credit card, e-wallet, or bank account.
Step 4: Buy Cannabis Stocks
Now that you have funded your brokerage account, you are able to buy your chosen cannabis stocks or ETF. To show you how simple the process is, the following walkthrough is based on eToro.
Firstly, we are looking to invest in the Horizons Marijuana Life Sciences ETF – as this will allow us to buy shares in 10 different cannabis stocks through a single trade. As such, we enter ‘Horizons Marijuana Life Sciences’ into the search box.
Then, we click on the ‘Trade’ button to go straight to the investment page for our chosen ETF.
Finally, we simply need to enter the amount that we wish to invest. We are looking to meet the minimum, which is just $50 (about £40). After clicking on the ‘Set Order’ button, we are now the proud owner of cannabis stocks!
If you want to buy individual cannabis stocks as opposed to an ETF, the above process remains like-for-like.
In summary, the legal cannabis industry is still in its infancy. In fact, many of the cannabis stocks that you have access to have been around for just a few years. As you might well know, this gives you the opportunity to get your foot in the door at a very early stage. In theory, this means that the upside potential is huge.
But, and as is the case with any investment vehicle, you must have a firm understanding of the risks. After all, the growth of the legal cannabis industry is very much dependent on legislation. That is to say, investors need more and more governments around the world to begin relaxing laws on the consumption and sale of cannabis – especially in the recreational sector.
Know that we’ve shown you how to buy cannabis stocks, you may want to have a go for yourself. If so, we recommend using eToro, which offers the best cannabis stocks, low fees and copy trading tools.
What are cannabis stocks?
Cannabis stocks are companies listed on a public stock exchange that are involved fully, or partially, in the global cannabis industry. By buying cannabis stocks, you hope that you will be able to sell them at a later date for a higher price.
Do cannabis stocks pay dividends?
Very few cannabis stocks pay dividends as of mid-2020. This is because most firms operating in the space are relatively new, so they do not yet have the potential to distribute profits with shareholders.
How do I buy cannabis stocks that are listed in Canada?
You need to use a UK broker that gives you access to the specific stock exchange that the cannabis stocks are listed on. In the case of Canada, this will be the Toronto Stock Exchange. Some cannabis stocks are also listed on the country's secondary marketplace - which is the Canadian Securities Exchange.
What fees are associated with cannabis stocks?
You will need to pay a share dealing fee when you buy stocks - regardless of the sector the company operates in. The one exception to this rule is eToro, which still allows you to buy stocks without paying any share dealing charges.
What is the minimum investment amount of cannabis stocks I can buy?
This will vary from platform-to-platform. In the case of eToro, you can invest from just $50 (about £40).