5th Oct 2021
Back in the 1970s, it would have been hard to predict that cannabis stocks in 2021 would be a hot topic for investors, and yet here we are. After several decades when marijuana was frowned upon as the drug of dropouts, scientific research by respected institutions like the University of California, John Hopkins University, and University College London showed that cannabis – especially cannabinoids, or CBD, a non-psychotropic derivative of the cannabis plant – holds potential as a medical treatment.
As the scientific establishment increasingly aligned on the medical benefits of cannabis, legislation followed. In 1996, California became the first state to legalize medical cannabis 1, and others followed suit. Today, 37 states plus Washington, D.C., have legalized medical marijuana2, as have Canada 3 and Mexico 4, and there are hopes that the Biden administration will decriminalize and even legalize it on a federal level5. Popular opinion is behind him; research from the Pew center revealed that 91% support the legalization of medical marijuana 6.
One of the main factors driving the medical marijuana market is the need for more effective treatments for mental health disorders. It’s estimated that over 300 million people globally experience serious depression7, and 30% have depressive disorders that don’t respond to current treatments8. The stress, fear, isolation, and bereavement of COVID-19 caused mental health disorders to soar, with the number of Americans saying they suffer from depression or anxiety leaping from 11% in December 2019 to 42% in December 2020.9 But existing mainstream medications for anxiety, depression, and PTSD are woefully ineffective in some cases; access to therapy is uneven; and pharma companies are actually shrinking mental health R&D budgets.10
Medical cannabis stocks are also driven by the demand for better pain relief, with the global market in analgesics predicted to grow 1.1% compound annual growth rate (CAGR) to $23 billion by 202611. Over the counter pain relief does little for chronic pain, and the opioid crisis revealed that stronger analgesics can be dangerously addictive, but CBD can be safe and effective at relieving hard-to-treat pain12.
With medical marijuana becoming more mainstream and signs that the market could keep growing, investor interest in promising marijuana stocks in 2021 picked up the pace. The popularity of special purpose acquisition companies (SPACs) in the past couple of years gave many cannabis stocks the start they needed, and as the funding pipeline grew, so did the number and reliability of solutions in the market. Grand View Research, a market research company, predicts the market will grow to $74 billion by 2027.13
It’s worth noting that according to US laws, companies that handle cannabis directly can’t list on the NYSE or the NASDAQ, although it may be possible for ancillary companies that provide professional services for plant handling companies. As a result, most cannabis stocks list on the Canadian stock exchange.
If you’re interested in being part of this disruptive market, helping fund the development of new medical treatments, and perhaps also excited by the idea of backing a drug that was illegal just 30 years ago, here are some of the potentially best cannabis stocks to buy in 2021.
1. Defiance Next Gen Altered Experience ETF (PSY)
PSY is the disruptive medical psychedelics and cannabis ETF offered by Defiance. It follows the BITA Medical Psychedelics, Cannabis, and Ketamine Index, which is a rules-based index that tracks the performance of companies listed in North American Exchanges that derive at least 50% of their revenues from developing, manufacturing, or trading in medical cannabis, psychedelics, and ketamine.
As an ETF, PSY allows you to spread your investment across a number of promising psychedelics and cannabis stocks with a single investment decision, rather than trying to identify the best cannabis stocks of 2021 from a large field. The fund has an expense ratio of 0.75%, $6.8 million in net assets, and 20 holdings as of 08/31/21. At close of trading on August 31, PSY was valued at $21.27.
2. Cardiol Therapeutics (CRDL)
Cardiol Therapeutics is a biotechnology company focusing on developing innovative treatments for cardiovascular disease (CVD). Its main product, CardiolRx, is an oral cannabidiol formulation that’s THC-free and is currently undergoing phase II and phase III clinical trials on COVID-19 patients who have risk factors for or a prior history of heart disease. Cardiol also has ongoing research collaborations into the use of subcutaneous cannabidiol products to treat heart failure.
Cardiol has been trading on the Toronto Stock Exchange (TSX) and recently began trading on the NASDAQ too. As of August 31, the stock was trading at 3.74USD, up 66% in the past month, and had a market cap of $158.47 million.
3. Charlotte’s Web Holdings (CWBHF)
Based in Canada, Charlotte’s Web is a market leader in hemp extract wellness products, working with whole-plant hemp extracts that hold the full spectrum of phytocannabinoids. It fields a line of products that include CBD oils, gummies, and topical preparations, as well as CBD for dogs.
Charlotte’s Web’s recently-released second quarter earnings report noted that revenue had increased 11.4% over Q2 2020, to $24.2 million, and that gross profit rose 65.5% to $15.8 million14. As of August 31, the stock traded at 2.458 USD, with a market cap of $513.55 million.
4. PharmaCielo (PCLO)
PharmaCielo is a Canada-based company that produces high quality CBD-dominant and THC-dominant cannabis extracts. It has a manufacturing license in Colombia and trades medical cannabis extracts to many of the world’s leading medical cannabis companies, as one of the world’s largest licensed cannabis producers.
PharmCielo trades on the TSX Venture Exchange in Canada as PCLO, and on the OTCQX, an American marketplace for companies already listed on a qualified global stock exchange, as PCLOF. It’s continuing to expand its customer base, recently adding a new customer in Brazil15 and beginning shipments to another customer in Canada16. Its stock price was 1.21 USD as of August 31, and it has a market cap of $189.82 million.
5. Zynerba Pharmaceuticals (ZYNE)
Zynerba Pharmaceuticals is working on pioneering next-generation transdermal cannabinoid products that could improve the lives of patients with rare or near-rare neuropsychiatric conditions such as Fragile X syndrome (FXS), Autism Spectrum Disorder (ASD) in pediatric patients, 22q, and developmental and epileptic encephalopathies (DEE).
Zynerba’s primary product is a CBD gel called Zygel,which is currently being evaluated for these conditions. The company expects to begin a phase 3 confirmatory trial of Zygel in Q3 2021, to validate its results in children and adults with FXS17. Zynerba trades on the NASDAQ as well as other stock exchanges worldwide. The stock price was $4.43 as of August 31, up 0.45% in the past month, and it had a market cap of $159.64 million.
1 “Timeline for Marijuana Legalization in the United States: How the Dominoes Are Falling” January 2, 2020 https://www.fool.com/investing/timeline-for-marijuana-legalization-in-the-united.aspx
2 “Marijuana legalization is sweeping the US. See every state where cannabis is legal” July 9, 2021 https://www.businessinsider.com/legal-marijuana-states-2018-1
4 “Mexico’s cannabis legalization, and comparisons with Colombia, Lebanon, and Canada” March 30, 2021 https://www.brookings.edu/blog/order-from-chaos/2021/03/30/mexicos-cannabis-legalization-and-comparisons-with-colombia-lebanon-and-canada/
5 “President Biden Supports States’ Right To Legalize Cannabis” April 20, 2021 https://www.forbes.com/sites/willyakowicz/2021/04/20/president-biden-supports-states-right-to-legalize-cannabis/?sh=e3c7f2f16604
6 “Two-thirds of Americans support marijuana legalization” November 14, 2019 https://www.pewresearch.org/fact-tank/2019/11/14/americans-support-marijuana-legalization/
7 “Psychedelic Treatment with Psilocybin Relieves Major Depression, Study Shows, Hopkins Medicine,” November 4, 2020. https://www.hopkinsmedicine.org/news/newsroom/news-releases/psychedelic-treat¬ment-with-psilocybin-relieves-major-depression-study-shows
8 “Compass Pathways (NASDAQ:CMPS) IPO Proves Psychedelic Medicine Investment Thesis, WPSS Investments Newswire,” October 1, 2020. https://www.globenewswire.com/news-release/2020/10/02/2102708/0/en/COMPASS-PATHWAYS-NASDAQ-CMPS-IPO-PROVES-PSYCHE%C2%ACDELIC-MEDICINE-INVESTMENT-THESIS.html
9 “COVID’s mental-health toll: how scientists are tracking a surge in depression” February 3, 2021 https://www.nature.com/articles/d41586-021-00175-z
10 “Why ‘big pharma’ stopped searching for the next Prozac,” Mary O’Hara and Pamela Duncan, January 27, 2016. https://www.theguardian.com/society/2016/jan/27/prozac-next-psychiatric-wonder-drug-research-medicine-mental-illness
11 “Global Analgesics Market Research Report 2020” April 14, 2020 https://www.marketstudyreport.com/reports/global-analgesics-market-research-report-2020?gclid=Cj0KCQjws-OEBhCkARIsAPhOkIaJX41CIfdNLA7ADF5y2og0mGg4F8mQQQVWj24sI9-994p-DUmoVEAaAiumEALw_wcB
12 “Cannabinoids and Pain: New Insights From Old Molecules” November 13, 2018 https://www.ncbi.nlm.nih.gov/pmc/articles/PMC6277878/
13 Grand View Research. “Legal Marijuana Market Size Worth $73.6 Billion By 2027. Accessed Nov. 12, 2020.
14 Charlotte’s Web Holdings, Inc. Reports Q2-2021 Results, August 12, 2021 https://s22.q4cdn.com/636117063/files/doc_financials/2021/q2/revised/CWEB-Aug12_2021-Q2-2021-Earnings-Release.pdf
15 “Canadian-Colombian Cannabis Co. PharmaCielo Expands In Brazil With New Pharma Customer” August 5, 2021 https://finance.yahoo.com/news/canadian-colombian-cannabis-co-pharmacielo-193249284.html
16 “PharmaCielo Makes Initial Shipment to Canadian Life Sciences Company” June 15, 2021 https://www.newswire.ca/news-releases/pharmacielo-makes-initial-shipment-to-canadian-life-sciences-company-875109304.html
17 “Zynerba Pharmaceuticals Announces Phase 3 RECONNECT Trial Design for Zygel™ in Fragile X Syndrome” May 5, 2021 https://ir.zynerba.com/news-releases/news-release-details/zynerba-pharmaceuticals-announces-phase-3-reconnect-trial-design