While consumers are still being educated on the differences between hemp, CBD, THC, and cannabis in general, one piece of legislation that passed is opening up new investment opportunities in the cannabis industry.
When President Donald Trump signed the 2018 farm bill legalizing industrial hemp, it paved the way for a sector of the agricultural industry to obtain legitimacy. Investors are closely watching daily developments due to the potential multibillion-dollar market for cannabidiol (CBD) the non-psychoactive compound of cannabis. Products such as beverages, pet snacks, lotions, creams, salves, oil, and supplements containing CBD have proliferated in the consumer market. Part of the appeal is that consumers who have never been part of the marijuana subculture demand the benefits of CBD without feeling the effects of becoming “high.”
According to the Motley Fool, cannabis stocks are soaring because of continuing changes in regulating cannabis including the signing of the farm bill. While the deregulation of hemp dramatically impacts the economy, stock market, and the cannabis industry, it is crucial for any investor to understand the difference between cannabis and hemp.
Both cannabis and hemp come from the cannabis sativa species, while cannabis can also be part of the cannabis indica species. Both contain over 100 chemical cannabinoids, but it is the makeup that makes each different. The most common cannabinoid found in cannabis is tetrahydrocannabinol (THC), which produces the psychoactive effect. THC levels found in hemp are less than 0.3 percent. Think of the analogy between a lion and a domestic house cat. Both are part of the feline species Felidae, but lions (as well as tigers and leopards) are also part of the Pantherinae and roar while domestic cats (as well as lynx and puma) are only part of Felidae and purr.
Industrial hemp is now regulated by the Agriculture Department, and CBD has been removed from the Controlled Substances Act. It has yet to be determined how the Agriculture Department will regulate industrial hemp. The Food and Drug Administration (FDA) also retains its authority to regulate products containing cannabis and cannabis-derived compounds. As reported by the Associated Press, the FDA issued a statement stating that CBD is still considered a drug ingredient. At present, it will remain illegal to add CBD to food or health products without the agency’s approval. Currently, states will be able to enact laws related to industrial hemp with the potential of creating a patchwork of state legislation across the country.
Still, beverage giants and food companies are taking a serious interest in the estimated $2 billion U.S. market. Tilray Inc. just announced a partnership with Anheuser-Busch to research cannabis-infused beverages, and Constellation Brands Inc. has invested heavily in cannabis producer Canopy Growth Corp. Other large companies such as Molson Coors Brewing Co. and Coca-Cola Co. are becoming part of this market with possible big returns.
Investors have targeted smaller companies offering CBD beverages such as New Age Beverages Corp. Some firms have discovered that CBD-related announcements about their products can pump its stock prices. One example is Charlotte’s Web Holdings offering CBD products through its extensive retail operation and is poised for top and bottom line growth according to analyst Jason Zandberg of PI Financial. Zandberg credits the passing of the farm bill allowing hemp farmers access to crop insurance, water rights, among other agricultural benefits, and even the national banking systems, to propel CWEB’s revenue growth.
As hemp, CBD and cannabis become more mainstream, the investing landscape continues to evolve to include all aspects of the cannabis industry including investing in hemp and CBD, either in a startup or part of an established business branching out.