The world is changing fast and this is throwing up great investing opportunities, in my view. We are reconsidering the rules regarding our consumption of everything from food to fuel. As we see the rise of veganism and the move away from polluting fuels, there is the promise of great growth in these segments. One such market with huge potential is that for cannabis.
Growing marijuana market
For proof, we only need to look westwards at countries like Canada and the US that are clearly ahead in their journey to legalise cannabis compared to the UK. Not only is medical marijuana acceptable, but increasingly, recreational marijuana is beginning to gain acceptance too. And in line with this, some pot stocks have made gains. For instance, US based cannabis retailer Green Thumb industries rallied very recently as it doubled its profits.
If laws on cannabis are increasingly relaxed, I reckon the same could happen here in the UK as well. Right now, companies in the sector are still at very early stages. Consider Kanabo (LSE: KNB) and Cellular Goods, both of which were listed on the London Stock Exchange earlier this year. Both are also penny stocks, so it may just be a good time for me to consider them for their future potential.
Kanabo makes progress
Kanabo released its half-year report last month, which contained some encouraging signs. The company has developed a new wellness product line that could both improve sleep and have calming properties. It also entered into an agreement with PharmaCann Polska of Poland to produce its medical cannabis product. And it has entered into distribution agreements. This looks promising so far, but it remains to be seen whether or not it is able to make a dent in the market.
The pandemic has been a challenge for many companies, and Kanabo is no exception. I think its revenue generation capability will become more obvious over the next couple of years, so I will watch it carefully. There are risks of course. Medical marijuana is a nascent market, and if it does not gain acceptance, the future of the company might be harder to predict. It is too early for me to buy the stock.
Cellular Goods launches products
David Beckham-backed Cellular Goods is at an even earlier stage of development than Kanabo. The company, which develops lab-made cannabis-based wellness products, is in the process of launching its first set of products right about now. It is a pre-revenue company. With little to go on right now, I struggle to find a good reason to buy the stock at present. This is especially so since the industry is new as well.
What I’d do
I do think, however, that from time to time it is a good idea to assess where both companies are at. If cannabis related regulations get relaxed further or if their products find broad-based acceptance, they could well see explosive growth over time. And I would not want to miss out on buying these penny stocks if and when their prices start inching up.
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Manika Premsingh has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.
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