After the GameStop (GME) stock revolution, many beginning investors are taking their investments into their own hands. In this article, we’ll walk you through some of the best, safest, and most lucrative options for investment in the CBD industry. Keep reading to see our ranking of the best CBD company stocks for beginners.
The topic of retail investment is an intriguing one because it seems to polarize popular opinions to an extreme degree. On the one hand, many individuals have acknowledged the success of retail investment movements such as was the case in the GME stock squeeze. On the other hand, experienced investment professionals advise against engaging in risky investments without proper training.
But in some cases, an industry’s growth is so strong that even the most shrewd financial advisors will admit that it’s a good play. And in the case of the CBD industry, the growth is reaching near-interstellar rates of acceleration.
According to Vantage Market Research, the CBD industry is set to reach a jaw-dropping value of $47.22 billion by 2028–that’s up from $4.9 billion in 2021. This represents an unheard of Compound Annual Growth Rate of 21.3%, which is the most relied upon factor for evaluating growth versus the value of an industry–where growth is the more desired variable.
Such a massive growth rate means that many CBD companies will be able to flourish and grow during the next few years. And such expected growth means that investors will be more likely to see a return on their investments.
With a ubiquitous flourishing of the CBD industry, beginning investors will find this market full of great investment opportunities. But even still, it can be confusing and challenging to evaluate them all without some background in investment. So with that in mind, we’ve created this guide to prepare you for the process, so that you can position yourself to share in the titanic success of the CBD industry.
Balancing Risk and Opportunity
This guide does not constitute financial advice, and is instead designed to function as a stepping off point for those who want to take investing into their own hands. This necessarily means taking responsibility for one’s own choices–which entails both risk and opportunity.
So let’s look at how to balance the scales towards opportunity and away from risk. The most impactful factor in this equation is exercising clear-minded financial assessments. Consider asking yourself these questions:
- Where are your finances like currently?
- Where would you like to be financially?
- What goals would you like to hit through investmenting?
- What amount of money can you consider discretionary income?
- What percentage of this discretionary income do you wish to invest?
While it’s always possible to hit a gold mine in investment–even as a beginner–it’s also possible to get wrecked. Even when investing in the best CBD stocks for beginners, the risk is there. So one of the most straightforward methods to mitigate this risk is to only invest what you can afford to lose.
Disposable Income Versus Discretionary Income?
Before you take the leap and invest in one of the best CBD stocks for beginners, you’ll need to self-evaluate the state of your finances. Disposable personal income (DPI) is the amount of money left over after income taxes, and is often referred to as net income.
But as a beginner of investing, you’ll want to pay closer attention to what’s called discretionary income. Discretionary income refers to the amount of money that’s left over after ALL necessities. Such necessities include things like rent, groceries, and anything you need to continue your life on a day-to-day basis like medicine.
By calculating the discretionary income that you have to work with, you can start to formulate an idea of what amount you can invest with relatively low risk.
NOTE: This means ‘low risk’ insofar as losing a conservative portion of one’s discretionary income represents a low risk outcome. Whereas losing a large portion of one’s disposable income could spell financial ruin.
Despite the counterintuitive language your disposable income is not disposable!
How Much Should I Invest?
According to NerdWallet, you should invest roughly 10% to 15% of your annual income. But as mentioned above, some of us have much less of a discretionary income due to above-average expenses.
So always remember to way the investments against your overall liquidity–that is, cash on hand. If investing 10% of your income will place you under financial stress, then consider investing half as much or even less.
The point of investing as a beginner is simply to start engaging in beneficial financial practices. Even if you only start with $10 dollars, you can start to build the good habits of investing that can lead to greater successes in the future.
In other words, it’s okay to start small!
What about the Gamestop (GME) Revolution?
So you made some money off the GME stock, or knew someone who did? It’s important to remember that this situation resulted from a once-in-a-generation collaboration between tens of thousands of retail investors against hedge fund culture.
Without getting into the nitty-gritty of what constitutes a ‘short squeeze’, suffice to say that as a beginning investor you should not be looking for unicorn investments. These almost never happen, and even when they do they are still risky.
Your best bet for a beginning investment is something like one of the best CBD stocks like those we will soon outline for you. These investments are positioned in a stable industry market with stellar technicals, so that you can make money in both the short term and the long term.
Methodology of Ranking the Best CBD Stocks for Beginners
What constitutes a good investment will vary from person to person. This is why people pay to consult financial advisors–for their expert opinion. Nevertheless there are some universal factors that contribute to an investment being great.
More specifically, there are some clear factors that make a stock perfect for beginning investors. Here’s an outline of the factors we used to compile this ranking–that we believe will be most important to beginning investors looking for safe and rewarding stocks in the CBD market.
- Longevity: Is the company positioned to last? Will they outlast competition and continue to grow in a saturated market?
- ROI & Profitability: Has the company already peaked? Will they continue to grow amidst staunch competition in the market?
- Stability: Is the company stable in its performance? Does the company’s stock performance demonstrate too much volatility?
- Transparency: Can a beginner to investing find the necessary information about the company? Does the company and its management demonstrate trustworthiness and dependability to stockholders?
- Innovation: Does the company demonstrate the sort of creative problem solving and innovation needed to thrive amidst an increasing number of competitors?
The final point of comparison that we weighted rather heavily was whether the company files with the SEC. Now while many of you may not be the biggest fans of the SEC, and understandably so, some public companies will look to take advantage of the CBD surge.
If a company doesn’t file with the SEC, they will have more freedom to make such maneuvers that could hurt retail investors, and can do so without fear of reprisal. So in this case, we focused more on companies that filed with the SEC.
With all the necessary preamble out of the way, let’s get into the best CBD stock picks for beginning investors!
The 10 Best CBD Stocks
Before we start, one last note: these stocks are not ranked in any particular order because they all offer different strengths and weaknesses. We will outline these strengths and weaknesses in the description section of each stock.
And once again, we must iterate for clarity: this guide does not represent financial advice in any capacity. This guide is meant for responsible individuals looking to conduct their own research. Invest at your own risk.
Charlotte’s Web Holdings
Charlotte’s Web Holdings is one of the most dominant CBD stocks, retaining both public adoration and the validation of financial analysts year after year. Its dominance is evidenced in its market share and control of the retail sector with more than 22,000 active locations.
Just recently, as of March 9, 2022, Charlotte’s Web’s CBD gummies were voted the best of the industry. As such we believe that Charlotte’s Web is one of the most safe and stable options for beginning investors looking to break into the CBD market.
If we were to put forward a critical analysis however, we would point to the saturation of retail markets working as a potential vector of stagnation for this stock. However, their continued quality and market share dominance insinuates a bright future for this company.
Pros
- Well known and well respected
- Most dominant in terms of CBD market share
- Continued innovation and quality
Cons
- Heavily reliant on retail success
- Continued growth relies heavily on continued expansion
- Might reach points of performance-plateaus (stalled growth or even diminished value)
Jazz Pharmaceuticals
This company built its success early and capitalized on the increasing importance of clinical treatments using CBD. Jazz Pharmaceuticals is a biopharmaceuticals company that developed one of the first pharmaceutical medicines using CBD and has filed papers with the SEC.
Founded in 2003 and based in Ireland, this company has demonstrated tremendous growth and innovation–all while retaining the trust of the public and their patients alike. Because of its early position in the pharmaceuticals industry, we believe this stock is poised to demonstrate explosive growth as the industry expands.
As they innovate and create new products, we think this stock could become one of the most lucrative options on this list. As you might expect from this statement however, such results might only occur in the longerm, which makes this stock better for investors looking for a long-term investment rather than a short-term payout.
WIth that said though, this stock has demonstrated growth of 30% or more in response to positive medical news surrounding its products and research–though currently the stock has receded from all-time highs.
Pros
- Firmly positioned in the pharmaceuticals industry
- Nearly two decades of success
- A trusted name by both patients and investors
Cons
- Reliant on innovation in the pharmaceuticals space
- Slower growth and profitability vectors compared to newer companies
- Could experience staunch competition as more companies move into the space
Canopy Growth
Canopy Growth is not just a CBD company, and instead is built around multifaceted expansion into the larger cannabis market. Canopy Growth is a name associated with owned and operated cannabis growing operations, which allows this company to target all cannabinoids for product development and other considerations. While the stock’s 52-week highs and 52-week lows demonstrate some stark volatility, this also represents short term buy and sell opportunities for beginning investors willing to put more effort into monitoring and trading.
We believe one of the key vectors of growth for this company is Canopy Growth’s positioning in the minor cannabinoid markets. By owning cannabis farms and routes of distribution, this company is posed to dynamically adapt to the changing market demands.
While admittedly more volatile than other stocks on this list, the potential upside is also very high and warrants further consideration.
Pros
- Excellent position to develop new products and adapt to the market
- Poised to capitalize on growing cannabis markets
- Potential upside on short-term capitalizations
Cons
- Could experience downturn from increasing regulations on cannabis
- Reliant on a functional supply chain
- Demonstrates volatility
Village Farms Intl
This titan of industry has 30 years of experience in the agriculture business, and while not all of those years were spent in the cannabis industry, they have become a pillar of it in recent years. While this stock isn’t strictly a CBD stock, Village Farms represents a more diversified investment option that isn’t totally dependent on cannabinoid markets.
This stock excels when an efficient supply chain enables plant-based growing and product development operations. Obviously the current strains on the supply chain have encouraged a downturn on the six-months-chart of this stock. This does however represent a good buy opportunity for those willing to bet on an economic upturn in this department.
Additionally, this company is well-positioned globally. This means that as cannabis markets expand to other areas around the world, this stock could see some major upside. While its charts at this time might not be alluring, the company is eager to demonstrate its loyalty and commitment to shareholders.
Pros
- Diversified presence across many sectors unreliant on cannabinoids
- Recent downturns represent a great buy-opportunity
- Great global positioning to capitalize on future growth in international markets
Cons
- Reliance on the supply chain amidst chaotic conditions create volatility in the stock
- Might only generate major returns in the mid- to long term.
- Due to diversified holdings, this stock might benefit less from growth specific to CBD markets
GrowGeneration
This company demonstrated incredible growth and market dominance in the sectors supporting the cannabis market’s agricultural needs. GrowGeneration offers tens of thousands of products and 63 retail and distribution centers with direct-to-farm delivery.
Of course any company built around delivery services experienced brutal damages due to the supply chain dysfunction of recent years. This explains the stock’s downturn over the last six months, however the company has managed to deftly correct for these problems and delivered stability to stockholders where other companies continued to spiral.
The robustness of this company has been demonstrated amidst the trying circumstances of recent years, and so this encourages a more bullish position once supply-chain conditions improve. Until then, this stock remains a stable investment in the short-term.
Pros
- This stocks position in the agriculture industry stands to gain much value as the CBD market grows
- Downturns due to supply-chain issues demonstrated the stock’s resilience
- These downturns also represent a solid buying opportunity for long term positions
Cons
- Reliance on supply chain may delay large returns
- Lack of diversification may lead to an overreliance on cannabis growing markets, which are particularly susceptible to economic stressors and regulation
- Might work best for long term positions, and less so for mid- to near term positions.
Neptune Wellness Solns
Neptune Wellness Solutions offers 8 brands, 136 skus, and more than 20,000 retail locations. This company’s focus on sustainability, natural plant ingredients, and health-minded has led to an advantageous position in the CBD market–where it’s become a trusted name.
This stock scores very high on its trustworthiness and transparency, but has demonstrated confusing performance to stockholders. We’re including it on this list due to analysts suggesting that it’s a good buy opportunity. While one of the riskier stocks on this list, many believe it is set to take off in the near future.
Recent downturns mean that if this stock goes on a run, stockholders could see some great returns. We would encourage caution with this one though, because while speculations lean toward bullish action, its overall performance has been much farther behind industry averages.
Pros
- Depressed stock value presents a good buy opportunity analysts say
- Diversified products and brands deliver good market positioning
- Poised to benefit greatly from CBD industry growth
Cons
- The riskiest stock on this ranking
- Overall performance of stock is low
- Might not be the best CBD stock for beginners
Hydrofarm Holdings Group, Inc.
This company stands as one of the golden standards of hydroponic equipment in the agricultural sector positioned to work with cannabinoid markets. What makes Hydrofarm Holdings Group stand apart is its more than 4 decades of success in the industry.
While recent pivots have seen it catering specifically to cannabinoid markets, this long history demonstrates the versatility and dynamic positioning of this company. Short term growth for this stock has been excellent, as it has demonstrated a recovery after a near industry wide downturn.
Many comparable companies have yet to demonstrate such recovery, meaning this stock demonstrates greater stability than most. Future demands for hydroponic equipment will be the primary vector for this stock’s success.
Pros
- Good growth signals in the short term
- Demonstrated stability amidst industry wide turmoil
- Trusted company with 40 years of experience
Cons
- Heavily impacted by supply chain problems
- Overreliance on hydroponics might slow growth of stock
- Advances in alternative growth technology could present staunch competition
Cara Therapeutics, Inc.
Cara Therapeutics offers an array of cutting edge clinical treatments using cannabinoids. This company is positioned at the front of the pack in pharmaceuticals designed to treat specific diseases such as chronic kidney disease (CKD), and chronic liver disease.
Cara Therapeutics stock has demonstrated great indicators for short term thriving in recent months. While the six month charts show a characteristic downturn that few companies escaped, this recent growth provides this stock has a place in future markets.
We believe this stock stands to grow tremendously as new products are proven, and new clinical studies reach completion. As such, this stock stands as a solid consideration for near- mid- and long term positions.
This flexibility of position functions as a forgiving opportunity for beginning investors.
Pros
- Proven success in its pharmaceutical products
- Great potential for growth with future innovation and product development
- Short-term growth indicators in recent charts
Cons
- Lack of diversity in current product offerings
- Wide discrepancy between 52 week high and 52 week low
- Some volatility is likely for short-term positions
Tilray, Inc.
This company represents one of the most globally dominant cannabinoid companies in the world with locations in Canada, the United States, Europe, Australia, and Latin America. As a result Tilray is perfectly positioned to capitalize on growth across international cannabinoid markets, which analysts predict to play a vital role in projections of the CBD market.
Tilray stands behind thousands of products, research programs, and operations across various sectors of the cannabinoid markets. As a result, these diversified standings help to alleviate short term pressures experienced by countless companies in the industry.
This stock demonstrated tremendous stability and resilience over the last six months. While similar companies plummeted without pause, Tilray demonstrated quick recovery and stabilization. While beginning investors may still need to monitor volatility, this stock is one of the more stable in the industry.
Pros
- One of the most diversified companies in terms of holdings and locations
- Great short term performance indicators
- Stands to benefit enormously from future expansion of international cannabinoid markets
Cons
- Stock performance strongly tied to international supply chain efficiency
- Global business stressors lead to stock volatility
- Might only offer great value on long term positions
Innovative Industrial Properties, Inc.
Last but certainly not least, we look at Innovative Industrial Properties Incorporated–the single largest provider of real estate for business entities in the cannabinoid space. Despite a variety of factors that have impacted this sector, this stock has remained resilient throughout the last year–with a downturn that was markedly less than many comparable companies.
Despite the stressors of the world pandemic, Innovative Industrial Properties demonstrated success in managing its properties amidst broken leases and social distancing pushing many out of their leases. This is likely one of the most strenuous tests the stock could undergo aside from a crash of real estate markets, but the stock retained much of its value–an achievement that’s at least in part due to the increased value of their real estate holdings.
We suspect that as the world begins to more fully recover, leasing properties will become a more viable option again and this stock will see some resurgence in growth. This likely positions this stock as a better option for long term positions, but beginning investors should monitor short term activity as well.
Pros
- Strong performance throughout terrible market conditions
- Analysts deliver favorable reads of this stock
- Stands to benefit tremendously from expanding cannabinoid markets
Cons
- Overreliant on real estate markets may lead to volatility or limit growth
- Currently demonstrating conditions more favorable to long term positions
- Analysts suggest real estate markets might currently be in a bubble
FAQ: Investing in CBD Stocks for Beginners
Now that we have identified some of the best investment options for beginners, it’s important to contextualize this information. So in this section we will attempt to answer some of your most important questions.
When Should I Invest in CBD Stocks?
While we have attempted to compile the best CBD stocks for beginners according to both short term and long term considerations, it’s important to note that the market is always in a state of flux.
Before investing in any of these stocks, be sure to pull up the charts and consider its current performance. If it’s on a major upturn, you might want to consider waiting a bit. Conversely, if a stock is plummeting, you will likely want to see some signs of life and stabilization before locking in your purchase of the stock.
Always check what the analysts say first as well. Thankfully, many websites will aim to quickly assign a stock an opportunity of either ‘buy’ or ‘sell.’
When should I Sell my CBD Stocks?
There’s no perfect answer here. If you’re looking for specific advice you will want to contact a professional financial advisor. But in terms of generalities, there’s some rules to consider that might help you reach your own conclusions.
First, never panic sell. Selling your stocks in a panic means that you forego due diligence to calculate risk and short-term projections in response to the anxiety of a stock’s falling value. Unless something truly catastrophic has happened to the stock, chances are the stock will trend towards a point of consolidation after a rapid drop–which means it will recover briefly at some point.
And if your position was designed for a long term investment, then short term drops are really not the end of the world. Fact is that they happen, particularly in today’s economy.
As a rule, you should only sell when you decide the time is right. Unfortunately, we can’t provide a clearer answer than this, because the best timing and action will depend entirely on your particular goals and investments.
CBD Stocks: Investing is not Trading
There’s an important difference between stock trading and simply investing in a stock. The CBD stocks on this ranking were included for their value as a straight investment. Stock trading involves closely monitoring performance of many stocks, and trading between them at advantageous times.
Successful stock trading requires much more of the individual in terms of market research and sound financial strategy.
The Best CBD Stocks Amidst the Global Pandemic
One of the most important things to consider when looking at the best CBD stocks for beginners is the overall effect of COVID-19 and related factors. For instance, because the CBD market is heavily dependent on the supply chain, nearly every CBD company has been harshly impacted over recent years.
On the one hand, this suppresses the value of a stock, but on the other hand, these conditions test the resilience of a stock and can drive down the price artificially, which represents the ideal conditions of a buying opportunity.
At the time of writing this ranking, nearly all of the above stocks are on the tail end of a six month downturn. But readers should not interpret this downturn as an indication of a bad stock, as this downturn was experienced across the entire industry for the most part.
Who Should Invest in CBD Stocks?
First and foremost, if you take investment in your own hands, you will likely want to choose an industry that you believe in and are passionate about. As such, we believe CBD stocks represent great choices for two types of people.
CBD stocks will be great for beginners to the world of investment, who love CBD and cannabis products. These individuals will find it a natural process to stay up to date on industry developments and business interests.
The second group of people who will find CBD stocks particularly alluring is the group interested in profitable long term positions. Projections for the CBD industry and the larger cannabinoids market are incredibly promising.
Individuals who enjoy following the technicals of a given market who want long term investments with strong projections will be the second group who may love investing in CBD stocks.
