Source: CannabisFN – February 25 2015
Publicly traded cannabis stocks gained 38.4% in 2014 and are likely to attract more institutional funding moving into 2015, according to a new report by Viridian Capital & Research, titled Cannabis Stocks: 2014 Review and 2015 Outlook.
The top performing sub-sectors of the cannabis industry in 2014 included consulting services (+496.4%), biotechnology (+120.8%), and infused products and extracts (+51.2%). While the cannabis industry handedly outperformed major U.S. equity indexes, the majority of those gains occurred during the first quarter with a subsequent shake-out resulting in steep declines across many different equities in the space.
Figure 1 – Sub-Sector Performance – Source: Viridian Capital & Research
There are a number of key industry growth drivers that should help jumpstart equity performance, according to the Viridian Capital & Research report, but there are also a number of risks that investors in the space should consider.
The ongoing legalization of medical and recreational marijuana throughout the U.S. should help improve underlying growth rates throughout 2015, with the anticipated addition of Alaska, Oregon, and Washington DC. Ballot initiatives in larger states like California could also have a significant impact on the movement, if approved. The popularity has grown so much that the issue could even be seen during the 2016 Presidential elections.
Despite the bullish macro picture, there are many challenges that remain throughout the industry. Institutional investors are becoming increasingly involved in the space, but the quality of many already-public companies are questionable, with toxic financings that have resulted in poor-quality balance sheets. The industry’s early stages also mean that there are few quality controls in place and systemic risks to the ecosystem still remain.
Cannabis investors looking for more information, including a sector-specific breakdown, can download Viridian Capital & Research’s report for free at their website: http://viridiancr.com/industry-report/.
Viridian Capital & Research was built with the intention of filling the financial and strategic void in the current Cannabis Sector. VCR is a specialized boutique banking and strategic advisory firm that provides research, investment banking, investor relations and corporate development services to emerging growth companies in the cannabis sector.