Best Cannabis Stocks In August 2022 –…


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As attitudes towards cannabis use become more tolerant and changing laws increase availability, the emerging cannabis industry has begun to present real opportunities for investors.

In the UK, the cannabis industry was valued at around £690 million in 2021, according to research from the Association for the Cannabinoid Industry (ACI) and the Centre for Medical Cannabis (CMC). 

Although cannabis products are tightly regulated — and only allowed for medical use in the UK — interest in the sector has been growing. This was partly sparked by the Financial Conduct Authority’s (FCA) 2020 decision to allow UK-based cannabis companies to be listed on the London Stock Exchange (LSE).

As part of a budding industry, shares in cannabis companies can be volatile. When investing, consider whether the stocks you plan to buy align with your priorities and risk tolerance. 

Any form of equity investment is speculative and your capital is at risk. Investments can go down as well as up, and you might not get back some or any of your money.

Best ‘Pure Play’ Cannabis Stocks

‘Pure play’ businesses are publicly-traded companies that operate entirely within one area — in this case, cannabis. 

The UK’s pure play cannabis businesses work in consumer goods or medical marijuana space, in-line with UK law that prohibits the use of recreational cannabis. 

  • Kanabo Group (KNB). The London-based Kanabo Group makes over the counter CBD (cannabinoid) formulations for vaping. It is also on the way to patenting a medical grade vapouriser, the VapePod. Although Kanabo’s share price has been on a slow downward trajectory since the start of 2021, its market cap of around £15 million makes Kanabo one of the UK’s largest cannabis companies.  As of August 2022, shares are trading at just below 3p.
  • Cellular Goods (CBX). Founded in 2018, Cellar Goods brands itself as a wellness business, offering high-end cannabinoid-based skincare and supplements. The company’s flagship products include a face serum, CBD capsules, and a post-shave moisturiser. Its market cap sits around £7.1 million, and shares are valued at around 1.5p as of August 2022.
  • Oxford Cannabinoid Technologies (OCTP). Based in the biotech hub of Oxford, this  pharmaceutical company was established in 2017 with the goal of developing prescription medicines based on cannabinoids. Its main area of focus is treating chronic pain conditions. According to research from the British Pain Society, around 28 million adults are affected by chronic pain (lasting longer than three months) in the UK alone. The company plans to tap into the £42.5 billion global pain relief market, gaining regulatory approval for its products in the UK, US and Europe by 2027. Its current market cap is around £8.2 million, with shares trading at 0.89p as of August 2022.

Best Cannabis ETFs

These exchange-traded funds (ETFs) bundle together several cannabis-related stocks, which can span across regions and sectors of the cannabis industry. An ETF is one option for diversifying your holdings in the cannabis market.

Bear in mind there is only one cannabis ETF operating in Europe, so investors who are interested in this option may need to look further afield. 

  • Medical Cannabis and Wellness Fund. This fund was the first cannabis-related ETF to launch in Europe, established by Canadian asset manager Purpose Investments, in partnership with German trading company Deutsche Boerse. Its holdings are spread across real estate, pharmaceuticals and fertiliser companies, including Scotts Miracle-Gro Co, GW Pharmaceuticals PLC, and Innovative Industrial Properties Inc. Like the majority of ETFs, it is passively managed. The Medical Cannabis and Wellness Fund is listed on the London Stock Exchange. Its management fee, paid as a percentage of your investment, is relatively high for this sort of fund at 0.80%.
  • AdvisorShares Pure US Cannabis ETF (YOLO). Launched in 2019, this US based fund invests in mid-cap firms in the UK, US, Canada, and Israel that derive at least 50% of their revenue from cannabis and hemp. The fund uses a buy and hold strategy, targeting businesses with long-term growth potential in industries such as biotechnology, pharmaceuticals, real estate, and agriculture. As an actively managed ETF, the fund’s expense ratio is relatively high at 0.76%,
  • Global X Cannabis ETF (POTX). This passively managed fund has a comparatively low expense ratio at 0.51%, and a dividend yield around 5% at time of writing. Domiciled in the US, the fund invests in small-cap businesses in the healthcare and real estate spaces. About a third of its holdings are US based, with the remainder split between Canada, Australia, and the Middle East. 

Best Large-cap Stocks with Cannabis Exposure

A number of large-cap, international companies have also dipped a toe into the cannabis industry, whether through investing in pure play cannabis companies, or expanding their own operations into the space.

Most of these large-cap companies are headquartered outside the UK, but they are all listed on the London stock exchange.  

  • Associated British Foods (ABF). As well as owning budget clothing brand, Primark, and producing agricultural products such as sugar and corn, Associated British Foods (AB Foods) is one of the UK’s largest legal cannabis producers. In 2016, the company switched from growing tomatoes to growing CBD cannabis at its Norfolk farms, selling the crops to GW Pharmaceuticals. AB Foods has a market cap of close to £13 billion. Shares trade at about £166 as of August 2022.
  • Scotts Miracle-Gro Co (0L45). You might associate the name with neat, healthy lawns, but Scotts Miracle-Gro is also making strides in cannabis. Its subsidiary, Hawthorne Gardening Company, sells hydroponic equipment and lighting to cannabis growers in the US. Scotts Miracle-Gro shares were trading at £70.77 as of August 2022. The gardening giant has a market cap of around £3.5 billion.
  • Colgate-Palmolive Co (0P59). In early 2022, the personal care company filed patents on three CBD formulations that it plans to use in oral products such as toothpaste and mouthwash. Colgate-Palmolive’s £52 billion market cap places it among the biggest personal care players making strides in the cannabis space. Shares are trading at £65.69 in July 2022.

Best REITs with Cannabis Exposure 

Real estate investment trusts (REITs) are companies that own, operate, or finance profit-producing real estate holdings such as warehouses, processing facilities and retail outlets. 

REITs can move into the cannabis industry by investing in facilities for growing the crop, producing cannabis products, and distribution networks. 

  • Innovative Industrial Properties Inc. (0JBD). Innovative Industrial Properties Inc. is dipping its toe into the cannabis market by investing in growing infrastructure including greenhouses and processing facilities. The fund’s current dividend yield (the returns investors are paid as a percentage of the stock they hold in the fund) is 7.35%, or about $1.75 per share held. Although it’s US-based (San Diego), Innovative Industrial Properties Inc. is listed on the London stock exchange.

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