Empirical evidence pertaining to many disruptive developments such as the invention of the World Wide Web, the growth of social media platforms, and the over-the-top content streaming industry, reveals that identifying and investing in these developing trends early could lead to multi-bagger returns.
Recent market developments, the improving regulatory outlook, and the latest transparency data released by Leafreport confirm the CBD industry has what it takes to become the next disruptive force in the global business world and grow into a multi-billion dollar industry in just a few years. Growth investors, therefore, should pay close attention to this space.
The Industry Outlook Is Promising
Two tailwinds are driving the CBD industry forward.
First, the many use cases of cannabidiol are taking the industry mainstream. Data from CBI Insights reveal that CBD products are used in the following business sectors.
- Health and wellness
- Food and beverages
- Pet industry
The wide variety of use cases available for cannabidiol will help the industry grow as consumer awareness grows toward these products.
Second, the maturing nature of the industry which is evident from the latest data released by Leafreport gives reason to believe that consumer engagement will increase in the future as products are now becoming trustworthy. The chief executive officer of Clever Leaves, a company that produces medical cannabis, believes that transparency is one of the key considerations of CBD buyers. In an interview with Forbes, he said:
“Consumers are getting more savvy on the benefits of CBD and they will begin to insist on knowing exactly what they are paying for and what they are getting when they purchase CBD products.”
Leafreport revealed in a report that out of the 36 CBD products tested in its study, 26, or 72% of products, had CBD levels within 10% of what was stated in the label of these products, which is considered as a sign by many industry experts that the manufacturer is delivering the promised goods. The industry, in fact, has come a long way to overcome the transparency issues faced as recently as 2018.
The Improving Regulatory Outlook
The legalization of cannabis is critical to the continued growth of the industry. Canada became the first G20 nation to legalize the use of cannabis products in 2018, and this led to a monumental shift in the market sentiment toward the CBD industry. Since then, the United States has made some noteworthy moves to approve the use of cannabis products for medical purposes.
According to data from the National Conference of State Legislatures, a total of 33 states in the U.S. and the District of Columbia, Guam, Puerto Rico, and U.S. Virgin Islands have approved publicly available cannabis programs. The U.S. Food and Drug Administration, on the other hand, is currently working in unison with the leading companies in this space to fast-track the approval process of cannabis drug products.
Elsewhere in Europe, Luxembourg is set to become the first country in this region to legalize the use of cannabis. This could mark the beginning of a new wave of optimism regarding the regulatory outlook for CBD products in the all-important European region.
As the industry matures, the transparency and accuracy of CBD products are bound to improve. This, in return, will be leveraged by industry participants to push regulators to speed-up the approval process of cannabis products around the world.
Best CBD Stocks To Buy
It’s always a prudent idea to invest in the leading companies of a young industry as these first movers often build economic moats that bring in sustainable earnings in the long run. Here are three such stocks to consider.
Aurora Cannabis Inc. (ACB)
Aurora Cannabis (ACB) is one of the first players to enter the CBD industry and is among the leading companies in this sector as well. The primary business activity of the company is producing and distributing medical cannabis products. However, the company has diversified its business operations to sell vaporizers and herb mills as well, in a bid to boost its market dominance. Aurora’s recent investment in Reliva, a U.S. CBD company, is an indication of its plans to grow inorganically as well, which might prove to be rewarding in the long run.
Shares have remained under pressure in the last 12 months primarily as a result of macro-economic headwinds facing the cannabis industry, including the oversupply of legal cannabis in Canada and the black market that sells the same products at fraction of the cost. To counter these threats, Aurora launched a budget-friendly product line in February with prices as low as $5/gram with high THC potency.
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