In the last 24 hours, Canada legalised recreational use of cannabis, or ‘pot,’ in a move that could have a huge impact on markets.
At stake is an estimated market of $200 billion — with more growth on the horizon.
According to Brendan Kennedy, President of Canadian cannabis firm Tilray:
‘It will be around a $100 billion opportunity over the next five to 10 years.’
As of the most recent available statistics, Canada dominates global production and exports, with CA$6.2 billion of the market.
But you have to remember that Canadians smoke a lot of pot, as seen below:
As a result, Reuters reports that ‘Australia will join Uruguay, Israel and the Netherlands in looking to fill the potential shortfall in supply’.
Below, you can see Cann Group’s enticing price performance over the past year:
David Radford, CEO of Hydroponics Company Ltd [ASX:THC] says that for now:
‘The Australian cannabis market is akin to the wine industry: you’ll have your premium, Grange hermitage wines, and then you will have goon bags. We will be at the premium end.’
Where to find growth in Aussie pot stocks
Another aspect of the budding Australian cannabis market is its potential to focus on intellectual property.
Australia is well known for its research capabilities and there is the option to not just harvest the product, but package it as a pharmaceutical.
GW Pharmaceuticals in the UK for instance, markets products such as an oral solution and a mouth spray.
Other options include treatments for acne and topical pain relief.
But perhaps cannabis’ most exciting prospect for widespread use comes from a little known cannabinoid present in varying amounts, depending on the strain.
A cannabinoid is a class of chemical compounds found in cannabis that acts on receptors in the brain.
There are at least 113 cannabinoids that can be found in cannabis.
The cannabinoid that may be of most interest is called cannabidiol or CBD.
CBD may be the best bet for Aussie pot stocks
CBD is so unique because it doesn’t really get you high.
So what’s the point then?
The point is that CBD is perhaps the most therapeutic of all the cannabinoids.
Its potential uses are vast — it can be used for multiple sclerosis pain, childhood epilepsy, mood disorders and anxiety.
With Australia’s background in research, this may well be the country’s best shot at a cannabis industry for the foreseeable future.
The good news is that in the past two years, the Australian government passed a law that allows for the export of medicinal cannabis products.
Knowing where to start investing can be tricky though.
There are a large range of Aussie pot stocks on the market, and not all of them will be winners.
For Money Morning