Cannabis Market 2020 Predictions

Cannabis stocks had a tumultuous time in 2019. After the Cannabis World Index reached a high in March, it took a downward turn. The Index was down 37.54% for 2019. However, this by itself is not cause to be pessimistic for 2020. Cannabis Growth Fund (CANNX/CANIX) is excited for the prospects of the coming year. Here are our predictions for the next 12 months as they unfold.

Predictions for the Cannabis Industry in 2020

Issues that led to marijuana stocks underperforming last year will continue to have some influence on the market in 2020 as the industry adjusts. One of the issues remains the ease of access to legal cannabis as opposed to illegal. At the end of the third quarter of 2019, legal marijuana was almost twice the cost of its illegal counterpart: approximately $10.23 compared to $5.59. Part of the reason for this is the immaturity of the market in new territories. Canada’s most populous territory, Ontario, has less than 100 cannabis stores. Colorado, which has had legalized recreational cannabis since January 2014, has a store for every 10,000 inhabitants. To match that density, Ontario would need closer to 1,400 stores.

In the United States, one factor that contributed to negative consumer sentiment was the glut of vaping-related illnesses. Over 2,600 cases of E-cigarette/Vaping product use Associated Lung Injury (EVALI) causing hospitalization have been reported to the Centers for Disease Control and Prevention. Sixty deaths attributed to EVALI have been reported. Recently-released laboratory data from the Center for Disease Contriol indicates that the cause of the EVALI outbreak appears to be illegally-produced and distributed vaping products containing vitamin E acetate, which is hazardous when introduced to the lungs. There has been a gradual but persistent decline in the number of cases emerging since the outbreak’s peak in September 2019.

Cannabis companies are responding to these issues in a number of ways. October 2019 saw the launch of Cannabis 2.0, allowing the sale of cannabis derivatives (such as edibles, beverages, and other products) in Canada. In legalized states such as California and Colorado, data has revealed that approximately 50% of cannabis-related sales can be attributed to concentrates and edibles, rather than flower. These processed products will be beneficial to cannabis businesses as they carry higher price margins than pure flower. Ontario is expected to open around 100 new stores in 2020, with more to come as time goes by. An increase in stores is being seen across the Canadian provinces.

Trends That Will Dominate the Cannabis Landscape in 2020

One trend that the Cannabis Growth Fund is expecting to see is a greater focus on premium legal cannabis. Rather than attempting to compete with the illicit market, we anticipate that many companies will invest in higher quality cannabis that consumers will happily pay a premium for. Our focus for 2020 is on companies that are building their brand around quality and consistency rather than bulk buying low-quality product in an attempt to compete with the illicit market.

We are also expecting the cannabidiol (CBD) market to grow and are focusing on companies producing CBD-only and CBD/Tetrahydrocannabinol (THC) combined beverages. While it is a small market in the US and Canada for now, we anticipate that it will become a highly sought-after product and are keeping a close eye on companies pursuing this, particularly companies with an aptitude for producing and selling brands that generate buzz.

The Cannabis Growth Fund is excited about the research biotechnology companies are undertaking into the medicinal benefits of cannabis. Medical cannabis as a means of combating specific diseases and ailments is a vector of investment that the Fund has been exposed to. We are also focusing on companies that are working to advance the process of extracting cannabinoids from the plant. The capital-intensive process of extraction could yield great benefits for the entire industry if improved on.

The Improving Legal Status of Cannabis in 2020

While 2019 was a good year for improving public opinions on marijuana, it is unlikely that 2020 will do much to jog the needle in either direction. In an especially contentious election year, it is likely to be overshadowed by other issues of greater concern to Americans. According to Gallup, cannabis has never been rated highly among the problems facing America. Most recently, cannabis (as a part of the larger ‘drugs’ banner) failed to figure in the top 10 issues Americans felt was most important, coming in behind poor leadership/the government, immigration, race relations, poverty/homelessness/hunger, healthcare, the environment, unifying the country, lack of mutual respect, ‘ethics/moral/religious/family decline’, and economic problems. Illinois legalized marijuana on January 1st, 2020 and a handful of other states are voting on legalization or expected to later in the year, either through ballot initiatives like Florida and New Jersey, or state House proceedings like Minnesota. However, the matter of federal legalization will likely be punted to the next administration, whoever forms it.

The Secure and Fair Enforcement (SAFE) Banking Act, protecting banks that partner with cannabis businesses, is intended to protect banks from doing business with marijuana companies, since both recreational and medical marijuana are still considered illegal at the federal level. While the Act passed the House with bipartisan support in 2019, but is not expected to make it past the Republican-controlled Senate. Multiple key Senate Republicans have expressed their opposition to the SAFE Act. Similarly, the Marijuana Opportunity Reinvestment and Expungement (MORE) Act seeks to remove marijuana’s classification as a controlled substance, decriminalizing it. It gained the approval of the House Judiciary Committee in November 2019, but has a long road before it passes the House floor, and again will be extremely unlikely to make it to the Senate floor with Speaker McConnell’s opposition to any marijuana legislation.

If you are interested in making shrewd investments in the marijuana industry in 2020, you can invest with Cannabis Growth Fund.

OF SPECIAL NOTE

Statements, estimates and forecasts are subject to significant legal, business, economic, and competitive uncertainties, including competition, limited access to bank services, litigation, enforcement actions, and the receipt of government authorizations. This includes differences in, among other things, laws, regulations and guidelines relating to the manufacture, transportation, and storage of cannabis, and the conduct of operations, which vary among the U.S. federal government, various states, and foreign jurisdictions. There can no assurance that such estimates and/or forecasts will be realized, and these are not indicative of future investment performance. Historical data is not indicative of future performance.

Before investing you should carefully consider the Fund’s investment objectives, risks, charges and expenses. This and other information is in the prospectus, a copy of which may be obtained from 888.885.0588 or at https://www.cannabisgrowthfunds.com/. Please read the prospectus carefully before you invest.

Investing involves risk, including possible loss of principal. The cannabis industry is subject to rapidly evolving laws, rules and regulations, and increasing competition which may cause such companies to change business model, shrink or suddenly close. These may limit access to banks, and create significant burdens on company resources due to litigation, enforcement actions, receipt of necessary permits and authorizations to engage in medical cannabis research or to otherwise cultivate, possess or distribute cannabis. Possession and use of cannabis is illegal under federal and certain states’ laws, which may negatively impact the value of Fund investments. Where legalized by states, cannabis possession and use remains a violation of federal law. The companies in which the Fund invests are subject to various laws and regulations relating to the manufacture, management, transportation, storage and disposal of cannabis, including health and safety, conduct of operations, and environmental protection. Even if a company’s operations are permitted under current law, they may not be permitted in the future, and a company may not be able to continue operations in its current location. Controlled substance legislation differs significantly between countries and may limit a company’s ability to sell products.

Foreign investing involves social and political instability, market illiquidity, exchange-rate fluctuation, high volatility and limited regulation risks. Emerging markets involve different and greater risks, as they are smaller, less liquid and more volatile than more developed countries. Investments made in small, mid-capitalization and micro-capitalization companies may be more volatile and less liquid due to limited resources or product lines and more sensitive to economic factors. Fund investments will be concentrated in an industry or group of industries, and the value of Fund shares may rise and fall more than more diversified funds. Purchasing and writing put and call options entails greater than ordinary investment risks. Options ownership involves the payment of premiums, which may negatively impact Fund performance. Please see the prospectus for details of these and other risks. Distributed by IMST Distributors, LLC.