Cannabis could be a key discussion point in the US Presidential campaign, giving it a much needed publicity boost in the backend of 2020, according to analysts.
Nawan Butt, portfolio manager of The Medical Cannabis and Wellness UCITS ETF (CBDX) says the second half of 2020 is looking positive for the cannabis market as it is set to benefit from a number of “major catalysts”.
Firstly, he expects cannabis to be a key talking point in the US Presidential election in November.
Through the Democrats, greater long-term support is predicted for either or both of the SAFE and STATES Acts, which will help strengthen medical cannabis businesses in the US.
In addition to this, multiple companies continue to commercialise their medical cannabis and CBD wellness strategies as key markets and research projects come online.
Nawan Butt said: “Under current regulations it is difficult to measure the appetite for cannabis investments in the United States. Due to their inability to invest in cannabis, US investors have found the next best associated growth vertical to capitalise on this opportunity.
“Ancillary businesses have seen massive demand as a high growth sector of the economy. Despite the current climate we have seen large equity capital financings close for ancillary plays including Industrial Innovative Properties Ltd and GrowGeneration. Both these financings were completed in excess of their original size, and anecdotally were 5x and 3x oversubscribed respectively. These anecdotes speak to the pent-up demand for growth stocks which is currently unavailable to many investors.”
Commenting on the performance of the cannabis market in 2020, he said the first six months show a great test of resilience for nascent industries in high growth verticals such as cannabis.
But the underlying problem caused by the pandemic is the disruption of business as many industries experiences a stop in earnings with mandated shutdowns.
Falling under the umbrella of medical services, most of the cannabis sector remained unaffected and continues with jobs and earnings growth.
However, within underlying sub-sectors, he stresses a differentiation of performance. Ancillary services combined for the strongest performance as companies with arms-length businesses to cannabis experience excess demand from investors in anticipation of progressive cannabis legislations in the US.
Pharmaceutical cannabinoids found a boost under the umbrella of healthcare and maintained strong upsides in valuation as the healthcare sector works overtime in an attempt to heal the world.
Butt added: “There are few public companies operating in the CBD wellness space and their immediate shedding of excesses in response to business slowdown has stabilised valuations. Second quarter earnings results will provide us with a better idea of their earnings growth in times of duress, especially in retail.”
Lastly, is the medical cannabis sub-sector which experienced difficulty operating in a capital-intensive industry with profitability still a promise of tomorrow? The silver lining here is the rationalisation of industry participants which will consolidate future sales on the basis of more reliable infrastructure.
The Medical cannabis ETF, CBDX, seeks to provide targeted exposure to the rapidly expanding legal medical cannabis industry that is set for further growth as more countries legalise cannabis for medical use. When you trade ETFs, your capital is at risk.
- Malta gives green light to three new cannabis clubs
- European Commission must address ‘inequality’ in access to medicinal cannabis across EU
- 1 in 8 older US adults now use cannabis products, finds study
- 3 main contributors to the entourage effect for cannabis consumers to consider
- Medical cannabis doesn’t impair cognitive function – study
- Ukraine’s medical cannabis legalisation delayed by opponents
- News4 months ago
NHS approves major clinical trial on cannabis medicines and chronic pain
- News6 months ago
UK patient secures first NHS reimbursement for cannabis flowers
- Advocacy6 months ago
Inside a UK cannabis club: changing lives, tackling stigma, building community
- News4 months ago
UK research finds GP support for cannabis as an alternative to opioids for chronic pain
- Industry4 months ago
‘Landmark’ ruling gives hope for UK CBD flower businesses
- News4 months ago
Malta: Advocates emphasise positive effects of cannabis reform amid ‘normalisation’ concerns
- Science4 months ago
Five new cannabis studies – ALS, epilepsy, Parkinson’s, chronic pain and blood pressure
- Science6 months ago
New research suggests alcohol, not cannabis, is the real ‘gateway’ drug