Why weed stocks could be the next big health investment trend

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To anyone who grew up in the ‘60s and ‘70s, it’s fascinating watching one of the drugs of choice for dropouts and conscientious objectors become rehabilitated as a leading investment choice for be-suited traders and Wall Street investment analysts.


With weed stocks and cannabis ETFs climbing the stock exchanges, teenage marijuana users might be wondering how long it will be before they stop having to hide their weed consumption. But anyone hoping that recreational cannabis will follow suit could be in for a long wait. Thus far, 36 states in the US, along with Washington, D.C., have legalized the use and sale of medical marijuana, but just 15 states have made the same move for recreational marijuana.

Medical necessity is driving the market onwards.

Mental health drives weed stocks to grow

One of the primary triggers for the acceptance and growth of medical cannabis is the need for treatment for mental health disorders. In many cases, traditional medications have little success for anxiety, depression, and PTSD, for example. People with severe depressive disorders, in particular, have been left with barely any treatment options.

Until medical cannabidiol (CBD) came along, a typical treatment for depression was psychotherapy perhaps combined with antidepressants. This approach tends to take a long time to have an effect and can cost a lot of money, especially for a good therapist. It can also be hard to find a nearby therapist who’s a suitable match.

For some people with mental health disorders, being able to easily and quickly buy medical cannabis from a local dispensary can be, quite literally, a lifesaver.

Chronic pain patients are crying out for a solution

Medication is notoriously bad at treating chronic pain, even though it’s long been one of the most common medical conditions. Over the counter pain relief only goes so far for someone with chronic pain, and most stronger prescription-only drugs can’t be taken on a long term basis.

The opioid crisis drove home just how dangerous strong painkillers can be, forcing many patients to choose between dangerous addiction and life-limiting pain. People with back pain, terminal cancer, arthritis, autoimmune disorders, and other long term conditions are understandably eager to take medical CBD to find some comfort.

As medical cannabis spreads, scientists are discovering more use cases for it:

  • CBD oil is one of the few ways for adults and children with epilepsy to keep their seizures under control
  • People undergoing chemotherapy use a blend of the two natural compounds found in plants of the Cannabis genus, CBD (cannabidiol) and THC (tetrahydrocannabinol), to lower the side effects of appetite loss, nausea, and pain;
  • Multiple sclerosis sufferers have found that marijuana improves their quality of life;
  • Medical cannabis brings symptom relief for people with neurodegenerative diseases.


When it comes to weed stocks, success breeds success

The first steps in the medicalization of cannabis showed there could be new treatments for old conditions hiding within the leaves. Researchers are hoping to develop breakthrough treatments for persistent, unresolved conditions, and that’s fueling the medical cannabis market to keep expanding.

As medical marijuana becomes more widely accepted, more investment dollars are directed towards R&D for new cannabis-based treatments, formulations, application methods, and dosage. This drives the market to expand further, creating more investment opportunities for cannabis-based innovation and opening up the market even more.

It’s not just the number of products that’s growing; the addressable audience keeps expanding too. When people see friends, relatives, and neighbors using medical cannabis safely, it removes the “druggie” stigma and encourages more people to try it themselves, so the pool of potential customers continues to increase.

It helps that it’s easy for medical marijuana users to access products. You can buy low-dose medical cannabis products like candy-like gummies and cannabis-infused luxury foods from Amazon; CBD vaporizer oils, tinctures, and concentrates from specialist online outlets; and higher doses are available with a prescription from licensed dispensaries, just like a host of other medications and health supplements.

As it becomes clear that medical cannabis products are safe, regulated, and trustworthy, users are increasingly taking them without a mental health diagnosis or direction from their primary care physician, whether or not that’s recommended by science. Step by step, medical cannabis use is becoming normalized among much of the population.

COVID-19 stimulated medical marijuana

The rise of mental health disorders during the COVID-19 pandemic has been well documented. Financial instability, long-term isolation, stress and fear of infection, and in some case large-scale bereavement have all combined to drive anxiety and depression rates sky-high. People living in areas that were hit hard by the virus, like Brooklyn, NY, are also showing signs of PTSD from the weeks when ambulance sirens were sounding constantly. At the same time, COVID-19 itself has been found to increase anxiety and depressive disorders, especially among people with long covid.

As mental health problems rose, the stigma around them dropped. People today are far more comfortable with admitting to mental health issues, thus raising the clamor for effective treatments. People suffering from high stress levels felt that medical cannabis was a reasonable alternative to existing anti-anxiety medications or self-medicating with wine and alcohol.

It helped that during the pandemic, most states considered that cannabis dispensaries were essential businesses, so they could remain open. Overall, the pandemic brought benefits for cannabis growers and retailers, as well as the ancillary companies that sell them gardening supplies and fertilizers.

The success of medical marijuana is encouraging a number of investors to pay it more attention. Some are excited by the idea of supporting legal drugs, while others want to be part of a potentially transformative health trend. As medical cannabis usage continues to spread, investors are reconsidering weed stocks.


Important Disclosures:

The Fund’s investment objectives, risks, charges, and expenses must be considered carefully before investing. The prospectus contains this and other important information about the investment company. Please read carefully before investing. A hard copy of the prospectuses can be requested by calling 833.333.9383.

Defiance Next Gen Altered Experience ETF:

Investing involves risk. Principal loss is possible. As an ETF, the fund may trade at a premium or discount to NAV. Shares of any ETF are bought and sold at market price (not NAV) and are not individually redeemed from the Fund. The Fund is not actively managed and would not sell a security due to current or projected under performance unless that security is removed from the Index or is required upon a reconstitution of the Index. 

A portfolio concentrated in a single industry or country, may be subject to a higher degree of risk. Specifically, the Index (and as a result, the Fund) is expected to be concentrated in Psychedelics Healthcare and Medical Cannabis companies. Such companies may depend largely on the government regulation and their profitability can be significantly affected by restriction on government reimbursements for medical expenses, rising costs of products and services, pricing pressure, limited product lines, intellectual property rights, and long and costly government product approval processes. The investments rely on U.S. and Canadian regulation of psychedelic, healthcare and cannabis, and the fund could be adversely affected by changes in these regulations. 

The Fund is considered to be non-diversified, so it may invest more of its assets in the securities of a single issuer or a smaller number of issuers. Investments in foreign securities involve certain risks including risk of loss due to foreign currency fluctuations or to political or economic instability. Small and mid-cap companies are subject to greater and more unpredictable price changes than securities of large-cap companies. 

PSY is new with a limited operating history.

Read more about PSY here, including performance and holdings:  https://www.defianceetfs.com/psy/. Fund holdings are subject to change and should not be considered recommendations to buy or sell any security.

Opinions expressed are subject to change at any time, are not guaranteed, and should not be considered investment advice.

The BITA Medical Psychedelics, Cannabis, and Ketamine Index is a rules-based index that tracks the performance of companies, listed in North American Exchanges, that operate business models focused on the usage of Psychedelics, Medical Cannabis, and Ketamine for medicinal and health treatment purposes. The index is owned, calculated, administered and disseminated by BITA GmbH. It is not possible to invest directly in an index.

PSY is distributed by Foreside Fund Services, LLC.

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