Best Hemp Stocks To Buy: Raking In The Green
Marijuana and hemp are the two main branches of the cannabis plant family, but there is an important difference.
Hemp is defined as cannabis that contains 0.3 percent or less of the psychoactive chemical THC, while marijuana contains a larger amount of the compound.
The recent legalization of hemp is generating excitement among investors. After decades of suppression, farmers are once again permitted to cultivate and sell this versatile plant. Companies that stand to profit from growing and distributing hemp and hemp-based products stand to realize significant profits, which may mean good news for those that invest now.
A Quick History of Hemp in the United States
When the 2018 Farm Bill was signed into law, hemp production became legal in the United States.
However, this isn’t a first for the country. Hemp arrived in North America as early as 1606, and for centuries it played a critical role in the economy.
In fact, it was so important that it became the subject of legislation in the 1700s. By law, farmers in certain colonies were required to grow hemp alongside other staple crops.
Hemp was used in the manufacture of rope, lamp fuel, clothing, and paper. In some areas, it could be exchanged in lieu of currency.
The Declaration of Independence was drafted on hemp paper by Thomas Jefferson, and Abraham Lincoln relied on hemp seed oil to fuel his household lamps.
Eventually, even Henry Ford began experimenting with hemp, designing an entire auto body from hemp fiber.
The advantages of hemp cannot be overstated.
It produces four time more paper per acre than trees, and hemp fiber is ten times stronger than steel.
According to a 1938 Popular Mechanics report, it could be used in more than 25,000 products at the time the research was published.
Today, that number is exponentially higher.
Unfortunately, when concerns about the negative effects of marijuana surfaced in the first half of the 20th century, hemp was targeted as part of the problem.
The 1937 Marijuana Tax Act discouraged cultivation of hemp by taxing it heavily.
In 1970, the Controlled Substances Act classified hemp as a Schedule I drug, making it illegal to grow and sell under most circumstances. For investors the good news is the 2018 Farm Bill changes all of that.
Hemp-Based CBD Products Taking the Marketplace by Storm
The return of industrial hemp has farmers, manufacturers, entrepreneurs, and innovators scrambling to make the most of this massive opportunity.
Many investors are weighing their options for getting in on the action.
Analysts’ estimates of market potential for hemp-based products vary widely, from a conservative $1.3 billion by 2022 to an astonishing $22 billion by 2022.
One of the biggest areas of growth is in wellness products that contain hemp-based cannabidiol (CBD).
From cosmetics and skin care creams to dietary supplements, CBD is rapidly gaining popularity among consumers.
The major players in this space are already showing significant gains in sales, which leads to a big question for investors. What are the best hemp stocks to buy that are most likely to generate substantial returns?
Should You Invest In Charlotte’s Web Holdings?
Charlotte’s Web is already leading the market when it comes to CBD wellness products.
It is ranked number one among organizations in this area of the wellness industry, offering consumers a variety of capsules, topical creams, tinctures, and gels.
Year over year, the third quarter of 2018 showed a 57 percent increase in sales, and the company generated nearly $8.7 million in earnings during the first three quarters of 2018.
Charlotte’s Web is likely to remain in its industry-leading position, because it enjoys a large head start.
With a 40,000 square foot research and manufacturing facility and a list of 2,700 retail locations already carrying Charlotte’s Web products, new entrants have a lot of ground to make up.
Charlotte’s Web already cultivates 300 acres of hemp plants, thanks to previous Farm Bill legislation that permitted pilot programs for research purposes. This puts the company far ahead of its peers.
Is Canopy Growth a Buy or Sell?
Canopy Growth [NYSE: CGC] is not yet operating in the United States, and this company hasn’t ever turned a profit.
Unlike Charlotte’s Web, it simply isn’t a major player in the CBD market at this time. However, those willing to accept a certain level of risk see great potential in Canopy Growth.
First, as soon as the US legalization of hemp was announced, the company’s CEO announced plans to enter the US market.
This could mean big competition for Charlotte’s Web, because Canopy Growth is already well-established in other parts of the world.
When measured by market cap, it is the biggest marijuana producer, and it has a hemp operation underway in Canada.
Canopy Growth [NYSE: CGC] has the technology required to extract CBD from hemp, and it recently purchased a Colorado-based hemp researcher.
Perhaps most important of all, Canopy Growth [NYSE: CGC] has an existing relationship with Constellation Brands [NYSE: STZ], which produces alcoholic beverages. This could be exceptionally valuable, as the potential market for CBD infused beverages shows great promise.
CV Sciences: Buy or Sell
Though CV Sciences hasn’t quite surpassed Charlotte’s Web in the hemp-based CBD market, it comes pretty close.
Some analysts believe it is only a matter of time before CV Sciences [OTC: CVSI] takes over the number one spot.
This company produces the top selling CBD oil brand, PlusCBD Oil, which is currently on the shelves of more than 2,000 retail locations.
Year over year, CV Sciences showed revenue growth of 143 percent in the third quarter of 2018, and earnings came in at $3.3 million.
Overall, CV Sciences stock gained 650 percent, which is one of the best results in the cannabis industry for 2018.
Best of all, CV Sciences has an exciting new product expected to come to market relatively soon.
The company is working on a smoking cessation medication that combines hemp-based CBD and nicotine to eliminate cravings for tobacco products. If it is as effective as the company indicates, a large demand for this smoking cessation solution is expected.
Choosing a path to enter the world of hemp investment is a challenge. Learn more by visiting Financhill online for information on the best investment options in every industry.
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The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.
Best Hemp Stocks To Buy: Raking In The Green Marijuana and hemp are the two main branches of the cannabis plant family, but there is an important difference. Hemp is defined as cannabis that
Is Hemp a Safer Way to Invest in the Cannabis Industry?
Charlotte’s Web has been profitable by focusing on hemp rather than marijuana.
Profits have been elusive for many companies in the cannabis industry. With federal law making it impossible for companies to expand their operations across the U.S without either acquiring a company in another state or setting up an entirely new operation, it’s been very difficult for costs to stay at manageable levels. The one workaround, however, has been for companies like Charlotte’s Web (OTC:CWBHF) that have chosen a different route: hemp.
Significant growth without significant losses
Hemp has been taking off in popularity since December, when the federal government passed the farm bill. That has led to a lot of growth for Charlotte’s Web. The Colorado-based company sells CBD products, including gummies, oil capsules, and even has products for dogs. In addition to selling online, the company has expanded through agreements with retailers across the U.S. and its products are found in thousands of stores in states where hemp products are permitted. In the past four quarters, sales have totaled more than $85.9 million. That’s 24% higher than 2018’s revenue of $69.5 million and more than double the $40 million Charlotte’s Web was able to generate in 2017. Amid all that growth, the company has been able to remain profitable.
In its last fiscal year, it posted a profit of $11.8 million, which was up from $7.5 million the year before. This year, it has continued to be profitable even while expanding very rapidly. In its most recent quarterly results, sales were up 45% year over year, and although profits of $2.2 million were down from the previous year, the company remained in the black.
Image source: Getty Images.
Retail has welcomed hemp with open arms
One area where Charlotte’s Web has been a force has been in retail. Back in Q1, the company had already achieved significant growth, announcing that more than 6,000 retail locations were receiving the company’s products as of May 8. The company had already added 2,300 new retailers in 2019, which was already more than it added during all of 2018. And as impressive as that has been, Charlotte’s Web has continued to grow since then.
In Q2, the company announced that more than 8,000 retail locations were now carrying its products. Even large national retailers like CVS and Kroger have been stocking them. Retail sales have accounted for the majority (53%) of revenue, making it a great source of success for the company. E-commerce has generated the other 47% of sales.
Had Charlotte’s Web been selling marijuana products, this wouldn’t have been possible. The company wouldn’t have been able to ship its products to retailers all across the country, and it certainly wouldn’t have the strong retail presence that it has today. By forming these relationships with retailers, the company has a big advantage over other entrants that may be looking to sell competing hemp products.
Why does this matter to investors?
Investing in hemp is a much safer option for cannabis investors, who may be concerned about the lack of nationwide legality of marijuana in the U.S. and the impact it could have on the industry’s growth. Although over the long term, the marijuana market may explode in size, that’s still a long way from happening.
In the meantime, investors can look to companies like Charlotte’s Web with more-sustainable businesses that can offer safer returns.
Charlotte's Web has been profitable by focusing on hemp rather than marijuana.