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Shorting The Cannabis Sector?

Cannabis Culture
When valuation starting to go surprisingly “high”, like in the cannabis or medical marijuana sector recently, people tend to go short. It’s a way to earn money when shares, sector indices, ETF’s or CFD’s are falling in value.

Never before has it been easier, thanks to modern short selling. This method allows you to go short with the press of a button. No need to call up a broker and lend equity, like in the good old days. But why shorting the cannabis sector?


Well, for starters, cannabis is a psychoactive drug that is sourced from the cannabis plant. With recent legislations, 100’s of companies started up to capitalise on this trend. Valuation gone bonkers in some places, where growth is the only goal and profit comes secondary. This might all backfire with Covid-19 effects, making it harder to lend money and increasing pressure for Cannabis firms to make profits.

Here at ShortSelling.com, we do a sector analysis of cannabis, marijuana and CBD (cannabidiol) with help of an expert. The report cover which people use it, why they use cannabis products and explain a bit about how this market got legalised in United States which started to grow global sales. Thereafter, we go into current cannabis trends, drivers of the legalisation, the growth of the market, which legal cannabis products you can find and the cannabis and marijuana stock market.

The cannabis plant is a member of the Cannabaceae family. The psychoactive drug was famous for its medicinal value in ancient India, China, Egypt, and a few Islamic nations. However, the uses of the drug have changed in recent years. It is primarily used in the treatment of a wide range of medical conditions and their symptoms like cancer, chronic pain, depression, arthritis, migraines, epilepsy, diabetes, and glaucoma.

According to the United Nations Office on Drugs and Crime, cannabis is the most widely cultivated, trafficked, and consumed drug internationally. Select “cannabis” from the dropdown in order to see the world-wide usage according to United Nations.

Amyris, Inc. logo

Company Name: Amyris, Inc.
“Amyris is a biotech company specialising in the engineering of yeast while producing substances such as cannabinoids.”
Ticker: AMRS
Primary Exchange: NASDAQ
Latest price: 2.71
p/e Ratio: -1.16

There are three types of cannabis used in the market. These are cannabis Sativa, cannabis Indica, and cannabis Ruderalis. Depending on the type, cannabis is also used for spiritual applications.

Which People Use Marijuana?

According to ABC News, 30 per cent of workers in the accommodation and food service industry reportedly use marijuana at least once per month. The same report shows that 28 per cent of the art, design, entertainment, sports, and media industry participants use the drug. Workers in the production, physical, and social sciences industry also use marijuana regularly for recreation purposes.

Scotts Miracle-Gro Co. logo

Company Name: Scotts Miracle-Gro Co.
“Scotts Miracle-Gro Co. gone from from lawn seed to weed. This interesting Ohio based growing company started in 1868 and are giving out a decent dividend. Selling supplies that help cannabis production grow.”
Ticker: SMG
Primary Exchange: New York Stock Exchange
Latest price: 149.15
p/e Ratio: 25.47

Other people, that use the drug are?
• Workers who are looking to increase their productivity
• The elderly who are suffering from chronic pains
• Young adults for recreational purposes
• Patients of cancer, depression, arthritis, oedema, and other medical issues

Aurora Cannabis, Inc. logo

Company Name: Aurora Cannabis, Inc.
“Aurora Cannabis believe that medical cannabis shouldn’t be costly or hard to get. Time to buy or are you rather shorting Aurora? “
Ticker: ACB
Primary Exchange: New York Stock Exchange
Latest price: 5.05
p/e Ratio: -0.21

The Legalisation of Marijuana

Different countries in the world have varying restrictions about cannabis, also known as marijuana. For many years, the recreational use of marijuana was illegal. Its legalisation started in 2012 with the states of Washington and Colorado. By July 2019, 11 states in the United States had already legalised the recreational use of marijuana. However, all state laws recognise it as a form of medicine. Following the passage of the Farm Bill, CBD was declared legal in all 50 States in America. The legalisation of the drug has significantly influenced the growth of the market.

Cannabis Chocolate

Cannabis Trends

The scientific interest in cannabis started back in the mid-1900s. The extraction of its active parts (tetrahydrocannabinol, cannabidiol, and cannabinoid) made the research possible. The medical cannabis market has gone through a lot of changes in different parts of the world, with increased pot trends. This is the main reason that led to the legalisation of the drug in different parts of the world. However, the only country where the drug is completely legal is Uruguay, with a population of 3 million people, and Canada. All other countries, apart from Uruguay, have different restrictions within their cities and states. Other states like Colombia and European nations are following suit when it comes to raising their legal restrictions on the drug.

Also, the increasing prevalence of chronic pain and the increasing demand for pain management medications have led to an increase in the need for medical cannabis in different countries. Research also shows that cannabis is a safer therapeutic drug than other alternatives in the medical world. It is usually used with opioid painkillers. The combination helps patients to reduce the dosage of opioids slowly. Because of the numerous advantages of the drug, the medical marijuana sector continues to grow around the world.

Molson Coors Beverage Co. logo

Company Name: Molson Coors Beverage Co.
“Molson Coors Beverage Co. are partnering up with HEXO Corp to create hemp-derived CBD beverages, non alcoholic. This type of drinks and reputable breweries partnering with cannabis companies, are one of the latest trends.”
Ticker: TAP
Primary Exchange: New York Stock Exchange
Latest price: 32.65
p/e Ratio: -43.82

Legal weed sign

Drivers of the Legalisation of Cannabis

Currently, the drug is not limited to the medical industry and recreational applications. Cannabis consumer products are very popular in the world. Companies and retailers that deal with these kinds of products keep evolving rapidly to meet the needs of mainstream consumers. The drug is applied in products as an infusion, topical, or a concentrate. Manufacturers work hard to produce products that meet the attributes that are demanded by modern consumers. Increased sophistication in packaging and advertising are a few methods that companies are using to meet the demands made by clients.

Cannabis-infused edibles are manufactured in such a way that they contain cannabis and other active compounds that are sourced from the cannabis plant. The products are either made by of infusing concentrates or other infused products like cannabis-infused butter. The most popular cannabis-based edibles in the market are candies, pastries, and beverages. The euphoric effect of these products takes longer to be achieved than when it is taken through smoking or vapour.

Another major driver of the cannabis market is the fact that it is less harmful than other substances like tobacco and alcohol. The use of cannabis helps to combat the adverse side effects of other treatments. For instance, it reduces nausea and increases appetite in patients that are going through chemotherapy treatments.

“Herb is the healing of the nation, alcohol is the destruction, said Bob Marley.”

The fact that there is a steadily increasing ageing population across the globe has influenced the increasing demand for medical marijuana. The reason is that geriatric patients tend to experience more cases of chronic illnesses and pains that can be relieved by cannabis.

Different countries have also found that the cost of enforcing restrictions against cannabis is higher than that of its legalisation.

Cannabis cookies

7 popular CBD and cannabis products

Cannabis flowers: The most wanted product by consumers is clearly flowers or some type of smokable CBD.
CBD Vaporizer: Sites such as Wildflower claims their CBD vaps are convenient, discreet and effective. Seems to be more popular in US and Canada compared to Europe.
Cookies: Into some afternoon snack? Well, now they got plenty of cookies containing CBD, while brownies might be even more well known from those going to Amsterdam. So called “edibles” are the third most popular category of legal cannabis products.
Oils: There are many various forms of CBD oils on the market with various flavours and strength. Medical cannabis oil is sold online by Tilray in Canda, in 6 different versions by Natureight from Netherlands and Amazon in the UK also got lots of different cannabis oil options. CBD oils are the forth most popular product legally available to consumers.

Tilray, Inc. logo

Company Name: Tilray, Inc.
“Tilray shares been highly volatile the last 6 months. What’s next for the company; time to go short or long?”
Ticker: TLRY
Primary Exchange: NASDAQ
Latest price: 4.79
p/e Ratio: -0.98

Cannabis sweets: Today, anything from cannabis candy to lollipops are available with CBD.
Cannabis tea: Many say that tea with CBD don’t have much effect, but Leafly think they found the secret to how to make cannabis infused tea in a better manner.
Cannabis beverages: Still a very small product category, because not many restaurants and places sell it and the demand is rather low. We guess the effect is not the same in most kinds of heavily diluted cannabis drinkables.

Why do people use products with CBD?

You don’t get the “high effect”, but might instead see some medical improvements. Some of the benefits may include pain relief, reducing anxiety and perhaps even help with depression for some people, according to industry experts. Among the less scientifically proven studies are claims that CBD oil may be efficient in cancer treatment, since it may reduce vomiting, pain and nausea.

Some also claim it improves vascular health and retains anti-psychotic effects. Because it features several medicinal benefits, the drug is used in different parts of the world to treat different kinds of illnesses. The type of cannabis that is used to treat illnesses or their symptoms is that which contains lower amounts of tetrahydrocannabinol (THC) and higher amounts of cannabidiol (CBD) as compared to that which is available in recreational cannabis.

According to Diabetes.co.uk, natural CBD oil might help some type 2 diabetics to reduce inflammation and even improve blood glucose control. Further, it might be useful for children with epilepsy and for people with insomnia to fall asleep quicker, Harvard Health recognises. However, everyone should be aware of the most common CBD side effects; diarrhea, changes in appetite and weight and fatigue. So always discuss with your doctor before using any products containing CBD.

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The Global Marijuana Market

According to the IMARC Group’s Medical Cannabis Market Report, the size of the marijuana market was worth 6.2 billion US dollars in the United States. In Canada, the market was reported to be worth 4.34 Canadian billion dollars by the end of 2019. In Europe, the estimated size of the medical cannabis market is 58 billion pounds. On the other hand, the recreational cannabis market is expected to reach a worth of 65 billion pounds in the next ten years or less. The lifted legal restrictions have significantly led to the growth of the market in different parts of the world.

The growth of the legal cannabis market in key South American markets is also experiencing a lot of growth. In 2018, the market’s worth, according to BDS Analytics, was 125 million US dollars. The cost is expected to increase up to 776 million US dollars in the next ten years or less.

HEXO Corp. logo

Company Name: HEXO Corp.
“One of the major licensed, medical cannabis companies in Canada.”
Ticker: HEXO
Primary Exchange: New York Stock Exchange
Latest price: 0.6584
p/e Ratio: -0.54

The Growth of the Market

The following moves significantly influenced the positive weed trend:

• In mid-2018, the Hexo Corp, a licensed producer in the cannabis industry based in Canada’s Quebec, entered a joint venture with Molson Coors Canada. The collaboration led to the production of CBD-infused beverages.
• In October 2018, Canada allowed the private use of recreational cannabis. However, the government limited the amount of the product that a person can possess to 30 grams. This made Canada the first G20 country to fully legalise the use of cannabis for non-medical applications.
• At the end of 2018, the US government enacted the Agriculture Improvement Act. The act classified hemp and marijuana as two legally different substances under the Controlled Substances Act. This move led to an increase in sales of CBD products in different parts of the United States. However, the plant itself remained illegal at the federal level. Soon after, other countries followed suit.
• In January 2019, the Colombian Medical Federation and Aphria allied. The alliance helped to develop an academic curriculum on the medical benefits of the drug. This move was instrumental in the growth of the industry.
• In March 2019, Altria Group Inc invested more than 1.8 billion dollars in Cronos Group Inc. This significantly led to the growth of the global marijuana market.

Cronos Group, Inc. logo

Company Name: Cronos Group, Inc.
“A contemporary global cannabinoid firm that distribute across 5 continents.”
Ticker: CRON
Primary Exchange: NASDAQ
Latest price: 5.08
p/e Ratio: 2.74

Breakdown of the Cannabis

• Based on species, the market can be broken down into cannabis, Sativa, Indica, and hybrid. Sativa is the most dominant and has the most applications.
• Based on derivatives, the market is broken down into CBD and THC. CBD is the most common because of its medical purposes, low toxicity levels, and non-psychotic effects.
• Based on the end-user, the market is divided into the pharmaceutical, research, and development industries, among others. The pharmaceutical industry is the leading end-user.
• Concerning application, the most common is cancer treatment.
• It is also broken down according to administration. Oral solutions, capsules, vapourisers, and topicals are the most common.

The Cannabis Stock Market

According to the Arcview Market Research and the BDS Analytics, the global legal cannabis market is set to hit 57 billion dollars in the next decade. The legalisation of the drug for recreational and increased applications in the medical industry is a major driver of the growth of the market. Beware that the volatility can be rather high in cannabis shares, so be careful.

AbbVie, Inc. logo

Company Name: AbbVie, Inc.
“AbbVie is the largest traditional pharma operator that gone green. It’s a spin off from Abbott Laboratories. They brought Marinol, a cannabis based drug, to the market. Are you ready to buy AbbVie or going short?”
Ticker: ABBV
Primary Exchange: New York Stock Exchange
Latest price: 86.23
p/e Ratio: 18.29

The Medical Cannabis stock market is quite significant, and one with the most significant growth. The reason is that more states and cities have legalised the medical use of cannabis marijuana than the latter. The recreational marijuana market is also experiencing significant growth. However, with Canada and Uruguay as the only countries that have legalised recreational use of the drug, the growth rate cannot be compared to that of the medicinal marijuana market. The future of cannabis is set to be great as more countries embrace legal weed trends.

Below are some of the major players in the Cannabis marijuana stock market:
AbbVie Inc is currently at the top with a market cap of 162.31 billion
• Belgian Anheuser-Busch InBev Sa/Nev comes in second with a market cap of 79.8 billion. Together with Tilray’s subsidiary, High Park Company, they are working with production of cannabis infused non-alcoholic beverages.
• At 70.12 billion is the Altaria Group, Inc. In 2019, they made a $1.8 billion investment in Cronos Group with focus on beverages with CBD.
Canopy Growth Corporation, the Scotts Miracle-Gro Company and Molson Coors Beverage Company follow suit with between 4 and 10 billion in market cap. In Toronto (TSE) where Canopy Growth Corporation is also listed, they have the rather cool ticker “WEED”, while the “POT” ticker was awarded to a tiny Vancovour based company called Weekend Unlimited Industries Inc, with less than $5 million in market capitalization. Their previous ticker for Weekend Unlimited Industries was YOLO.

Canopy Growth Corp. logo

Company Name: Canopy Growth Corp.
“Canopy Growth Corporation got a vision to be number one in the CBD industry. Will they succeed or not? You can either buy or short sell their shares.”
Ticker: CGC
Primary Exchange: New York Stock Exchange
Latest price: 14.17
p/e Ratio: -3.49

Companies with the Most Reputable Marijuana Stocks

Amyris Inc – This is a biotech company that specialises in the engineering of yeast in the production of a wide variety of substances the likes of cannabinoids.
Aurora Cannabis Inc – This Canadian Company manufactures, distributes, and sells a wide variety of cannabis products.
Aphiria Inc – Another Canadian Marijuana company that specialises in the production and sale of medical and recreational cannabis.

Impact of Covid 19 on the Cannabis Stock Market

The COVID 19 pandemic has led to reduced sales in some states because of social distancing and the closure of stores. This results in a slowed growth rate of the industry, hence the reduction of the worth of the stocks. This has led to the industry being constrained for capital. The stock market has experienced a lot of decline in all areas, including the cannabis stock market.

The pandemic is, however, promoting the growth of the online marijuana industry, with more people turning to online stores since the closure of physical ones. The fact that more investors are seeking liquidity does not help the future of marijuana.