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40% a year: Illegal substance to boom in Australia

A gloved hand holding a jar with a pipet of CBD oil. A marijuana plant.
It may not be legal to smoke but the Aussie weed industry is set for growth over the next five years (Source: AAP/Getty)

As marijuana continues to be legalised around the world, its use medicinally has been growing as well.

And while the Aussie cannabis industry is small right now, research suggests it’s bound to grow 40 per cent a year for the next five years.

So, how can you invest in this space before the boom takes place?

Here is everything you need to know about the Aussie cannabis industry.

Cannabis growing in Australia

Australia’s cannabis industry is worth around $258 million, but that is expected to grow as we start producing more of the sticky green plant.

The Federal Government made it legal to grow cannabis for medical and scientific purposes in 2016, but recreational use of the plant is still illegal in every state except Canberra.

Last year, the ACT legalised the possession of a small amount of weed, for personal use.

There are now a number of cannabis growing and production companies in Australia that are building large growing facilities to help get Australia on top.

Cannabis stocks

According to PonderingPot there are a number of interesting cannabis stocks listed on the ASX that are ones to watch this year. Here is a list of those that have signed overseas deals, or look set to be making some big business moves this year.

Here are eight stocks that have had positive traction so far in 2021.

1. MGC Pharmaceuticals (ASX: MXC)

MGC focuses on the production of cannabis-based medicines. Their business is based on a “nature to medicine” strategy and the company’s mission is to build a global bio-pharma company providing standardised, affordable plant derived medicines.

Following a listing on the London Stock exchange and positive results from clinical trials, this company has pulled back from its 400 per cent highs in February this year, but is still sitting up around 92 per cent this year.

2. Incannex Healthcare (ASX: IHL)

Incannex focuses on creating cannabis-based therapeutic products and is currently in the clinical testing phase for four specialised products. These are:

  • Obstructive Sleep Apnoea

  • Traumatic Brain Injury/Concussion

  • Sepsis Associated Acute Respiratory Distress Syndrome

  • Temporomandibular Joint Disorder

Incannex has made public a number of very positive clinical testing results for its products which has caused the price to jump massively. It is currently up over 80 per cent this year.

3. Australian Primary Hemp (ASX: APH)

Australian Primary Hemp uses cannabis to create various hemp products like he,p protein, oil and flour. The company currently partners with a number of different farmers to grow hemp around Australia and works with farmers from Tasmania, Victoria, South Australia and New South Wales.

Growth in the company has been sparked by a number of positive announcements including their new agreement to sell products in 7-Eleven stores and a following agreement for Woolworths to sell the same line of products and are currently up 33.8 per cent.

4. Little Green Pharma (ASX: LGP)

Little Green Pharma was the first medicinal cannabis company in Australia to produce locally-cultivated medicinal-grade cannabis oil products.

It has received a number of regulatory approvals for it’s product and doubled its share price since launching on the ASX. It is currently up over 18.5 per cent.

5. AFT Pharmaceuticals (ASX: AFP)

AFT was launched in 1998 by a husband and wife team and does not focus purely on cannabis, but instead on broader pharmaceuticals. The company focuses on the research and development side of medicinal cannabis products.

After reaching a deal with New Zealand last year, there was a lot of positive traction for the company at the start of the year. However, that has since dropped off a little, currently down 9.82 per cent.

6. CANN Global (ASX: CGB)

CANN Global has two divisions; one for medical cannabis and the other for cannabis derived natural foods. For the medical business it focuses on the distribution of cannabis products and for food it focuses on creation and production.

While the company hadn’t performed particularly well last year, it recently announced a deal with a German company and received its first order for its goods which saw the price boom in February, but is currently down about 14.3 per cent.

7. Althea Group (ASX:AGH)

Althea is an Australian licensed producer, supplier and exporter of pharmaceutical grade medicinal cannabis. It focuses on producing cannabis products to help those affected by debilitating diseases.

While Althea is down over 20 per cent since the start of this year, it is actually still up 175 per cent compared to last year. The company has struck partnerships and deals with companies all over the world including the UK, Canada, and Germany.

8. BOD Australia (ASX: BDA)

BOD began in 2014 in making natural herbal healthcare products that can already be found in pharmacies. When Australia allowed medicinal cannabis production in 2016, BOD jumped on board the train and now does both.

While not performing particularly well so far this year (down 22.45 per cent), BOD did perform well in 2020. It saw a nearly 90 per cent gain over 2020 on the back of multiple positive announcements. Like other Australian cannabis companies, it’s started to expand internationally into both the US and European markets.

Cannabis ETFs

If following and investing in specific stocks isn't for you, you will have to go overseas because there isn’t a cannabis ETF currently in the Aussie market.

Investopedia pointed to three US-based cannabis ETFs that are worth watching this year.

The Amplify Seymour Cannabis ETF (CNBS) is an actively managed ETF that gives exposure to the cannabis industry by investing at least 80 per cent of its assets in companies that generate 50 per cent or more of their revenue from the cannabis and hemp ecosystem.

The AdvisorShares Pure Cannabis ETF (YOLO) is an actively managed ETF that seeks long-term growth by investing in both domestic and foreign cannabis companies. The fund favours mid-sized companies in the US and Canada, but also invests in some companies based in the UK and a small fraction in Israel.

Finally, Cannabis ETF (THCX) tracks the Innovation Labs Cannabis Index, which includes global companies engaged in the legal cannabis, hemp, or CBD-based pharmaceutical, consumer product, and wellness markets.

As always, it’s best to check with a professional and make sure you do a lot of research before making any investments.

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