CFN Media (OTCQB: CNFN), the leading agency and financial media network dedicated to the North American cannabis industry announces the publication of an article discussing a groundbreaking cannabis investor sentiment study.
There’s no doubt 2019 has been tough on many cannabis-related stocks. Perhaps this has been owing to out-of-touch expectations by analysts or high-flying predictions that haven’t yet been realized as roll-out has taken more time than first anticipated. Still, there is no denying the so-called “green rush” has, in some ways, settled.
One thing is for sure, most affluent investors who have put their money into cannabis aren’t shaken, remaining confident that their investments will help secure their future, as concluded by a study titled “Cannabis 2.0: The Future of Investing in the Industry” recently commissioned by ManifestSeven and conducted by FTI Consulting.
Headquartered in Commerce, California, ManifestSeven (formerly MJIC) is the first integrated omnichannel platform for legal cannabis, merging compliant distribution with a retail superhighway spanning from San Francisco to San Diego.
On October 17, 2018, Canada became the second country globally behind only Uruguay to legalize recreational marijuana, limited to flowers and oils. One year later, Canadian laws were expanded to allow edible and select other cannabis products. In the U.S., 33 states and the District of Columbia allow medical marijuana, with 10 states and D.C. also permitting recreational use. At the federal level, cannabis remains a Schedule I controlled substance and completely illicit in the U.S.
The majority of Americans (59%) and Canadians (58%) are supportive of recreational marijuana, with support for medical marijuana even higher at 80% and 81%, respectively. To that point, Elaine Carey, Managing Director and Co-Head of FTI’s Cannabis Practice, emphasized the importance of medical marijuana in the future of the industry, saying, “I think 10 years from now, what people will be talking about with cannabis is not the fact that you can get high walking down the street, but the medical breakthroughs you’re going to see.”
After global marijuana sales came in at $12.2 billion in 2018, industry research firm Arcview Market Research and partner BDS Analytics forecast sales of $16.9 billion this year. Bank of America (NYSE: BAC) VP of Equity Research Christopher Carey sees cannabis disrupting industries ranging from alcohol to health and wellness as it rises to a $166 billion market.
ManifestSeven commissioned this study in order to take a deeper dive into investor interest in the cannabis industry, given the lack of hard data quantifying sentiment. The company
commissioned the global business advisory firm FTI Consulting to survey 2,300 adults across the U.S. and Canada, eventually narrowing that group down to 660 retail investors with at least $250,000 in investible assets. Of that group, 28% (185 people) have between $1 million and $10 million in investible assets. Not all participants were invested in cannabis.
A panel of experts also participated in the study to contextualize the data and add qualitative insight.
Questions covered a broad range of topics to zero in on attitudes of retail investors towards cannabis investment, inclusive of what attracts or impedes them. Moreover, the survey explored confidence in Cannabis 2.0, the colloquial term for the actualization of a fully legitimized, sustainable and profitable global cannabis industry.
The Bullishness is Clear
The Horizons Medical Marijuana Life Sciences ETF (TSX: HMMJ) is down about 23% in 2019 and 54% from its high in mid-March. Market correction aside, the independent study showed that 74% of American investors and 79% of Canadian investors view the cannabis industry as an appealing investment area.
83% of American respondents viewed the 12-month outlook for the overall cannabis industry as “slightly” or “very” positive, as did 79% of Canadians surveyed.
Of particular note is the confidence of those already invested in cannabis despite the market correction. 90% of Americans and 82% of Canadians in that group believe they are “completely on track” to achieve their financial goals in the next 12 months.
To put that into perspective, even as the Dow Jones Industrial Average, S&P 500, Nasdaq and TSX Composite are at or near all-time highs during the time of the study in September, only 60% of respondents without any cannabis investment felt confident in their path to meet their financial goals.
The positive outlook wasn’t pigeonholed to one cannabis market segment. In fact, respondents were overwhelmingly bullish across the board for cannabis companies focused on medical innovation, cultivation, distribution and logistics and ancillary companies (i.e. labs, consultants, grow products, etc.) supporting the industry.
Not surprisingly, there were varying levels of interest in the market potential amongst age groups. Millennials (age 18-34) neared unanimous support (85% in the U.S., 92% in Canada). Interest waned to a degree with those aged over 55, coming in at 48% for Americans and 59% of Canadians. Generally speaking, younger generations are more risk tolerant. However, the maturation of the industry is expected to attract more institutional investment, according to a participating securities analyst. As institutional support increases, it’s plausible that there could be an upswing in support from baby boomers.
Barriers to Investment
As with any emerging industry, there are challenges that need to be overcome to gain and maintain investor confidence. Communication sits atop that list. The majority of current investors (73% in the U.S. and 77% in Canada) agreed that the cannabis industry needs to do a better job of educating people on the healthcare and other benefits to society with legal cannabis.
Furthermore, flat-out education on the investment opportunity is lacking despite the media headlines and buzz between those already entrenched in the space, according to the study data. More than half of respondents (58% in Canada and 50% in the U.S.) reported being either “not aware” or “aware, but not knowledgeable” about the potential to invest in the cannabis industry in their country. To many, cannabis remains a gray area that they are unsure about being a good investment or not.
For sure, the legal ambiguity and policy paradoxes lend to this confusion that can only be overcome with education, industry maturation and regulatory cohesiveness down to the minutiae.
In that vein, just 19% of American respondents believe the U.S. government is an advocate for investment in the industry, compared to 52% of Canadians.
Trust, with respect to the negative stigma attached to cannabis, is a limiting factor to investment. Medical cannabis has been legal for decades in Canada and pockets of the U.S., but it was largely clandestine and viewed as taboo by most. “The stigma, paired with legal limbo, make it crucial for the industry to establish trust and prove its integrity,” the study explains, which, again, falls back on communication as integral to shaping the narrative and modernizing perceptions.
The study also detailed that about half of the people invested in, or likely to invest in, cannabis look to online media and social media to keep updated on investment opportunities.
Why is this Data Important?
The study is a pioneering effort by ManifestSeven to get a much clearer look at the state of the industry by understanding the views of the investing population. Business and legislators alike can glean valuable information about where demand and shortfalls reside within the industry. The accelerating swing in cannabis legalization is the result of the public clamoring for reformation and speaks loudly to the fact that changes in public opinion often precede policy change. In aggregate, public, corporate and regulatory support fuel consumer spending, the heartbeat of every economy, which underscores the very important nature of this type of research.
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