Returns On Cannabis Investments Hit New Highs In 2016 - Data

Josh O'Neill

23 June 2017

The Viridian Cannabis Stock Index gained 236.1 per cent last year, outperforming mainstream indexes including the Russell 2000, Dow Jones Industrial Average and the S&P 500, new data shows, hitting back at critics claiming investments in the sector are likely to go up in smoke.

A recent report by New Frontier Dat examined businesses that touch the cannabis sector.

The report compared the Viridian Cannabis Stock Index's gains to the Russell 2000 , the Dow Jones Industrial Average , the S&P 500 and the Nasdaq composite .

The data illustrates a strong growth pattern that is forecasted to continue over the next decade.

New Frontier Data predicts that by the end of this year, medical cannabis sales will grow to $5.3 billion, accounting for 67 per cent of total cannabis sales.

And by 2025, medical sales in currently legal states are forecasted to reach $13.2 billion. By this point, medical sales will comprise 55 per cent of all sales.

But cannabis stocks face strong criticism from many traditional investors and even those involved in the industry, suggesting investors should take a deep breath before they pour money into the sector.

“These are very risky stocks and not all of them are going to survive,” said Dan Nicholls, vice president of the Marijuana index, a benchmark that tracks US and Canadian stocks that touch the industry.

Still, legal sales of the plant are projected to reach $20.6 billion by 2020, with a compound annual growth rate of 29 per cent, according to Arcview Market Research.

Of course, cannabis investments will not suit every portfolio and many investors, especially those with a lower risk profile, are likely to just say no.