When Housing Market Highs Aren’t Enough

When real estate investors hear the term ‘CBD’ the first thing that probably comes to mind is central business district.

But for investors in marijuana stocks, CBD – or cannabidiol – is the secret ingredient that is driving the stellar performance of publicly held companies involved in the medical marijuana business. CBD is an extract from the cannabis plant that helps with the treatment of seizures from two forms of epilepsy.

Legal Pot Spending Is Projected to Double

Over the next five years, legal pot spending in the U.S. alone is expected to rise from an estimated $11 billion this year to over $23 billion in 2022, according to a report by ArcView Market Research and BDS Analytics.

That legal spending doesn’t include the nearly $50 billion that is spent on illegal pot sales each year in North America. As that money moves from under the table to over the counter, legal spending could zoom by about six-fold in the next five years.

Why Demand Is Rising

In addition to the medical benefits of cannabis, nationwide legalization of marijuana for recreational use is also increasing the demand for marijuana-related stocks. In the U.S., 31 states have legalized pot for medical purposes and nine – including Washington D.C. – have approved the herb for recreational use.

Canada Leading the Way

This month Canada is expected to legalize nationwide the adult use of recreational medical marijuana. Canada is also home to the largest number of marijuana-related companies whose stocks investors in the U.S. can buy and trade.

One example is Tilray, a Canada-based cannabis company whose shares trade on the NASDAQ. In June, Tilray IPO’d at $17 per share, reached a high of $300 per share the middle of September, and currently trades at about $145 per share.

Other marijuana stocks currently on the rise include U.K.-based GW Pharmaceuticals and Canada-based Aurora Cannabis Inc., whose shares rose over 6% on the Toronto Stock Exchange on news that the company was in talks with Coca-Cola to create pot-infused beverages.

How REITs Benefit from Pot

Pot stocks are also a boon to certain segments of the real estate market. Companies that invest in real-estate related funding for greenhouses, warehouses, and medical labs and retail outlets used by marijuana and cannabis companies are beginning to see a lot of capital looking for a place to invest.

Bet on The Buzz or Bust?

Skeptics point out that there are plenty of reasons why pot stocks are a speculative investment. A myriad of regulatory obstacles and Tilray’s wild five-month ride from $17 to $300 to $145 per share are cited as two examples of how marijuana-related stocks are speculative boom-and-bust buys at best.

Investors betting on the long-term buzz of pot stocks believe the party is just getting started. They believe mass consumer adoption and broad legalization from governments around the world will ensure big future gains.

Still, the question remains, are cannabis-related stocks the Bitcoin of tomorrow or the Pets.com of the 21st century?

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