Traders: you know it’s important to be aware of trends … right?
Why? Because trends can create hot sectors in the stock market, and that’s where some stocks can have the potential to see large gains within short time periods.
Last year, pot stocks were one of the hottest trends in the market, with many stocks in the sector going up at a stratospheric rate. It was an exciting time for traders … but nothing lasts forever.
In 2019, pot stocks have lost a little steam. But that doesn’t mean the trend’s completely dead — it’s just evolving and branching off. The sector to watch now is marijuana’s non-psychoactive counterpart, CBD.
In this post, I’ll walk through a brief education on CBD stocks, including what it is, why it’s a sector worth watching, and some suggestions for stocks to watch.
Table of Contents
What Exactly Is CBD/CBD Oil?
CBD isn’t pot … but it’s related.
CBD is short for cannabidiol. It’s a product that’s derived from the marijuana plant. But unlike THC (the famous compound in the plant that gets you high), CBD is non-psychoactive.
So CBD won’t make you feel euphoric or give you the munchies, but it potentially offers plenty of great health benefits. It’s promoted as a kind of miracle substance that can help with a broad range of physical and emotional ailments — from stress reduction for humans and pets to a salve for muscle pain to an aid for relieving cancer-related symptoms.
An Evolving Trend
Before the CBD sector started heating up, pot stocks were red-hot.
That was in 2018, when Canada officially legalized marijuana. The effect on the stock market was staggering.
Stocks for pot-related businesses, including grow operations and other related businesses in Canada, reached impressive new highs as production increased. Many traders saw this as foreshadowing, indicating future legalization in other countries and major economies like the U.S.
But such a spiking trend couldn’t last forever. So while it’s safe to say that pot stocks still have room for growth, the trend’s lost a little heat.
However, early this year, the U.S. Farm Bill passed. And it included a provision to legalize industrial hemp, which just so happens to be the main source of CBD.
Before the bill, CBD was in a legal grey area with limited distribution. But now it’s possible for CBD stocks to flood into a huge variety of markets, from major retailers to pet stores to drug stores and beyond.
And, of course, that sparked interest in this pot-adjacent sector, as traders see CBD as a more current, trending trading opportunity.
Top CBD Stocks to Watch
Tempted by this still-emerging sector? Add some CBD stocks to your watchlist…Your personal watchlist should reflect your own research and stock analysis — of course! — but here are some EXAMPLES of CBD stocks to watch…
Canopy Growth (NASDAQ: CGC)
Here’s a good example of a pot stock that offers opportunities for CBD speculators as well. It’s an Ontario-based company with a market cap of $13.78 billion. At the time of this writing, Canopy trades for about $42, with a 52-week high of $59.25 and a 52-week low of $24.21.
Canopy is best known for its medical cannabis products, including capsules and oils. But it also has a hemp division, where they offer hemp for uses including food, skincare, and fuel.
Looking for a stock with opportunities in both the pot and CBD sectors? Canopy could be a candidate.
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Charlotte’s Web Holdings (OTC: CWBHF)
Headquartered in Boulder, Colorado, Charlotte’s Web Holdings has been in the public eye since 2013. That’s when they were in a CNN documentary that featured the story of a little girl named Charlotte who suffered from seizures … until she started taking the company’s CBD oil.
This stock currently trades for about $14, with a 52-week high of $25.25 and a 52-week low of $8.13.
Even before the Farm Bill passed, Charlotte’s Web reported growth. And once the bill did pass, it was in an advantageous position — the company already had an infrastructure set up. Both the established operations and client list can make this a stock to watch in the sector.
CV Sciences (OTC: CVSI)
This company is based Las Vegas and runs on the smaller side, with a market cap of $416.33 million. It’s currently trading at $4.35, with a 52-week high of $9.20 and a 52-week low of $1.39.
This company has two divisions: pharmaceutical and consumer products. With the pharmaceutical division, they’re developing synthetic CBD-based medicine and pursuing FDA approval for drugs.
As a consumer products company, they have various CBD products that they distribute through health food stores, retailers, and healthcare providers.
With these two divisions, there’s a lot of opportunity for growth … but there’s also a strong need for caution. Pharmaceuticals can be notoriously volatile, and the FDA’s approval or lack thereof can change a stock’s trajectory very quickly.
GW Pharmaceuticals (NASDAQ: GWPH)
Based in the UK, this company was founded in 1998 and also operates in the U.S. With a market cap of $5.25 billion, GWPH currently trades around $170, with a 52-week high of $196, and a 52-week low of $90.14.
This company is involved with pharmaceutical products made with CBD. Their star product is called Epidiolex, an FDA-approved oral solution with CBD that helps treat seizures. It’s the first cannabis plant-derived medicine approved by the FDA, which put this company on the map.
With other drugs in the works, a lot of traders are tracking GWPH’s progress and hoping for further growth.
Sundial Growers Inc. (NASDAQ: SNDL)
Sundial Growsers is one of many Canadian marijuana stocks. The stock is popular among Reddit and Robinhood traders recently. It’s been trading high volume and recently had a multi-day breakout over $1.36.
On February 9, this news report was released, highlighting some comments from the CEO.
Trading Challenge
Pop quiz: What’s your most valuable resource when it comes to trading?
That’s an easy answer if you follow me at all — it’s knowledge. Too many traders ultimately fail because they don’t fully realize or respect this simple truth.
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In Closing
As a trader, it’s important to keep up with trending sectors and to watch emerging opportunities in the market. Could CBD stocks be the sector to watch in 2019?
With the recent legalization of industrial hemp in the U.S. thanks to the Farm Bill, the CBD stocks sector has plenty of buzz and plenty of room to grow. This could mean that stocks in this sector are poised for future growth.
But always do your research! You should definitely never just buy any stock in a ‘hot’ sector. Be sure to build a strong watchlist and keep it updated. And use a trading journal to track and learn from every single trade you make.
Do you trade in the CBD sector? What stocks are on your watchlist? Drop a comment and share your thoughts on this sector…
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