- The cannabis sector has declined about 50% since its high in March.
- But there’s one subsector that outperforms the marijuana industry … despite the hurdles.
- Click here to see how you can take advantage of the growing industrial extractor market.
The cannabis sector is in a brutal bear market. The major cannabis indexes are down roughly 50% since their highs in March.
But there is a subsector that has bucked the trend. Shares of this small group rose 21% during that same time!
Let me show you why this subsector will continue ripping higher.
3 Different Cannabis Markets
Cannabis offers unique opportunities for three different markets:
It has versatile uses thanks to two of its major compounds: CBD and THC.
CBD won’t get you high. But studies show that it helps with forms of epilepsy, depression, insomnia and more. With more research, that list of ailments will grow.
THC covers the recreational side. It does get people high.
While smoking is the most common way of ingesting these compounds, it’s becoming passé among millennials.
Smoking rates are down among young adults from a decade ago. Cannabis isn’t fighting Big Tobacco — but it does threaten the alcohol industry.
The reason behind that threat is that THC and CBD compounds can be extracted from the leaves and buds of the marijuana plant.
Extractors are specialists in the industry. They pull both compounds from the plant with meticulous precision.
They find these components in the bud, trim — leaves trimmed off of the bud — and stems of the cannabis plant.
The result is a concentrated, crude cannabis oil. One pound can sell for nearly $35,000! Per ounce, that is more valuable than gold.
And this crude oil can be refined into other products. Companies can make oil for vape pens, gel capsules, edibles and even drinks from it.
These products are attractive to an increasingly health-conscious consumer base. And we have yet to see the full potential of this market.
Extract Products Increase in Popularity
I actively keep track of the moves and developments in the industry. Watch my video below to catch my latest update on the marijuana market.
Now, according to GMP Securities LP — a Canadian investment bank — these extracts represented 13% of total sales in the fourth quarter of 2018.
But that was because only sales of gel capsules are legal.
Canadian lawmakers are taking a slow approach to cannabis legalization. That meant legalizing dried flower first and opening up the market to infused products later.
These extract products, such as infused edibles and snacks, are set to start hitting the shelves in December. CBD- and THC-infused drinks will be the last to roll out early next year.
And GMP Securities estimates that marijuana extracts and derivatives will make up 50% of the market in the years to come.
Canada estimates that about 10% of adults use cannabis on a regular basis, while about 80% of Canadians drink alcohol.
It’s no surprise that infused edibles and drinks will tap into this broader market. And that’s thanks to the one subsector that’s outperforming the marijuana industry.
Industrial Extractor Market Outperform the Bear Market
According to Ernst & Young — a research firm in London, England — the market will potentially be worth $4 billion by 2025. That’s because this market is growing fast.
Extractor companies are signing major deals with producers.
Back in September, MediPharm Labs signed a deal with TerrAscend, an international cannabis producer, valued up to CA$192 million.
Valens GroWorks followed with a deal worth roughly CA$50 million with BRNT Designs Ltd. — a maker of supplementary products.
This is just the latest news in a string of deals from major industrial cannabis extractors.
And the growing demand for these specialists is reflected in their share prices. These three top extractor companies are up 21% since the cannabis sector hit its high in March.
Meanwhile, the sector is down 50% overall.
You can see what I mean in the chart below.
The bear market in cannabis has dragged down most companies, but not the industrial extractor market.
But the best are defying the trend. Once sentiment turns positive for this sector, shares of these companies will return huge gains!
In the Real Wealth Strategist newsletter, we are keeping a close watch on the cannabis investing sector for new entry points into great names!
Stay tuned! Updates will follow.
Internal Analyst, Banyan Hill Publishing
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