If you’ve ever bought a lottery ticket or asked someone out on a date, you’ve taken a risk. Many risks are worth taking because the payoffs can be huge. Penny stocks are one of the riskier assets you can invest in. There’s a chance the rewards can be great, but there’s also the chance that you’ll lose the money you put in.
About 30 years ago, it was unimaginable for anyone to invest in a marijuana company. Now, marijuana stocks trade on some of the world’s major exchanges worldwide. The rising interest in marijuana stocks has also created an interest in marijuana penny stocks.
Marijuana penny stocks trade for a few dollars and even less than $1 in some cases. These equities are cheap to buy into and show great potential for growth. Sure, they can be a bit risky, but everything worthwhile requires some amount of risk. It’s how you diversify the risk within your portfolio that matters most.
Take a look at how Marijuana penny stocks can bring value to your investment portfolio.
Overview: Marijuana Penny Stocks
Marijuana stocks are companies that produce and distribute marijuana products. Marijuana, also known as the cannabis plant, contains 2 main compounds: cannabidiol (CBD) and delta-9 tetrahydrocannabinol (THC). THC is psychoactive, meaning it impacts the mind. THC is the ingredient that gives marijuana users a sense of high or euphoria.
CBD does not affect someone’s mind and has been found to be therapeutic. People report feeling more relaxed and suffering less pain with CBD. This is not the same thing that weed companies are offering, especially when you consider that the range of cannabis products is quite vast.
Most marijuana products contain either THC, CBD or both. Both THC and CBD can be consumed as food, drinks, oils and smoking. Hemp, a variation of the cannabis plant, can be used to create a variety of things including rope, textiles, paper and even biofuel.
Before 1996, marijuana use of any kind was illegal across all 50 states. Since then, marijuana laws have become more lenient. First allowing for medical use, and now increasingly for recreational use. In today’s market, the top marijuana penny stocks for 2020, 2021 and now 2022 represent a wide swath of the industry.
At this time, most states have made CBD or low THC programs legal. However, marijuana remains completely illegal in Idaho, Kansas, Nebraska and American Samoa.
The marijuana market is also growing outside the U.S. Although marijuana is still banned in most countries around the world, it is becoming more tolerated across some major economies.
Medical marijuana has been legal in Italy since 2013. Germany recently legalized marijuana for medical use in 2017. And in late 2018, Canada legalized the drug for recreational use. The success of marijuana companies is dependent on how widespread legalization will be throughout the globe.
Marijuana penny stocks offer the potential for high-growth, which is what attracts most investors. But these are some of the riskier assets you can have in your portfolio. As long as you do your due diligence and balance the risk throughout your portfolio, you should be well-positioned to see the benefits of these stocks.
Best Online Brokers for Marijuana Penny Stock
Marijuana penny stocks are somewhat of a niche investment category. It can be time-consuming to find relevant information about these stocks. Choosing the right broker can help. Take a look at some of Benzinga’s favorite online brokers as you consider investing in the top cannabis companies or picking up an American cannabis stock that will improve the performance of your portfolio.
Webull, founded in 2017, is a mobile app-based brokerage that features commission-free stock and exchange-traded fund (ETF) trading. It’s regulated by the Securities and Exchange Commission (SEC) and the Financial Industry Regulatory Authority (FINRA).
Webull offers active traders technical indicators, economic calendars, ratings from research agencies, margin trading and short-selling. Webull’s trading platform is designed for intermediate and experienced traders, although beginning traders can also benefit.
Webull is widely considered one of the best Robinhood alternatives.
- Active traders
- Intermediate traders
- Advanced traders
- No account maintenance fees or software platform fees
- No charges to open and maintain an account
- Intuitive trading platform with technical and fundamental analysis tools
- Does not support trading in mutual funds, bonds or OTC stocks
SoFi’s mission is simple: to help reach clients like you reach their financial independence and realize their ambitions. SoFi knows that this independence comes from making decisions that help your money start to work for you in the long run. The brand helps individuals make these decisions through personal financial products such as personal loans, student loans and automated and active investing.
The brand additionally provides in-person experiences such as educational and networking events, personalized guidance from experienced financial planners and one-on-one advising with professional career coaches. SoFi’s services have been highlighted in outlets such as Forbes, Medium, and CNBC’s Make It.
- IPO Investing
- Mobile Investing
- U.S.-based customer service
- Highly-rated mobile app for iPhone and Android
- Only available in the U.S.
Moomoo is a commission-free mobile trading app available on Apple, Google and Windows devices. A subsidiary of Futu Holdings Ltd., it’s backed by venture capital affiliates of Matrix, Sequoia, and Tencent (NASDAQ: FUTU). Securities offered by Futu Inc., regulated by the Securities and Exchange Commission (SEC) and the Financial Industry Regulatory Authority (FINRA).
Moomoo is another great alternative for Robinhood. This is an outstanding trading platform if you want to dive deep into smart trading. It offers impressive trading tools and opportunities for both new and advanced traders, including advanced charting, pre and post-market trading, international trading, research and analysis tools, and most popular of all, free Level 2 quotes.
Get started right away by downloading Moomoo to your phone, tablet or another mobile device.
- Cost-conscious traders
- Active and Advanced traders
- Over 8,000 different stocks that can be sold short
- Access trading and quotes in pre-market (4 a.m. to 9:30 a.m. ET) and post-market hours (4 p.m. to 8 p.m. ET)
- No minimum deposit to open an account.
- No chat support
It seems like new digital investment management platforms are sprouting up left and right, and for good reason — there’s a great need for easy, straightforward investment management that doesn’t cost an arm and a leg in fees or to get started. If you’re new to investing or an old hat who wants to make the switch to a virtual manager, deciding which features you need can be confusing if not overwhelming.
If you want a no-frills financial management platform, Axos Invest (formerly WiseBanyan) takes a traditional but sophisticated approach to automated online investing.
- Traditional investors trying out an automated investor for the first time
- New investors that want to take a hands-off approach to portfolio management
- Straightforward automated investing
- Relatively low account minimum and automated investing fee
- A solid roster of available investment account types
- Not a stand-out from other services if you’re someone who likes all the bells and whistles with your digital financial platform
- No direct relationship with a human financial advisor
This latest groundbreaking technology is IBKR GlobalAnalyst, a new trading tool that helps investors compare the rate of PEG or price-earnings growth valuations and provide more immediate and comprehensive financial metrics of stocks, globally.
Recognizing that stock selection can be challenging for investors to compare the valuations of domestic and international stocks, Interactive Brokers created GlobalAnalyst to offer investors a simple, yet powerful tool to easily evaluate investment opportunities around the world.
Using GlobalAnalyst, investors can search for stocks by region, country, industry, market capitalization and currency to uncover undervalued stocks worldwide. The resulting table displays the current market and financial metrics, including the PEG Ratio. The PEG Ratio is the PE ratio divided by the three-year compound earnings growth rate, and smaller PEG Ratios typically indicate undervalued companies.
- Price earnings growth valuations
- Easily evaluate investment opportunities
eToro is a broker that offers access to over 25 of the world’s most popular cryptocurrencies, forex and over 1600 stocks. They have a few unique education and useability tools. Traders can begin buying and selling in as little as 10 minutes.
eToro’s unique CopyTrader feature allows new investors to “copy” the buy and sell orders of professional investors, while the company’s eToro Club feature provides investors with a range of additional education tools and resources.
- Traders looking for an easy-to-use platform
- Traders who want to practice their trades using a virtual account before entering the market
- Simple platform that is easy to master
- CopyTrader feature that allows new traders to copy the same strategies used by professionals
- Virtual dummy account that gives you $100,000 to practice trades
- High non-trading fees
Features to Look for in Marijuana Penny Stock
Management: The success of marijuana stocks depends on high levels of growth. One of the best predictors of strong growth is a management team with a competitive business strategy. Management that aims to diversify products and expand operations into international markets will be better positioned. Partnerships and acquisitions are another way to drive growth. Look out for companies that are making strategic moves to cement themselves in the market.
Cost per gram: Companies that are able to reduce their production costs have a distinct advantage. Marijuana companies face heavy competition from black market dealers that are able to keep prices low. Be on the lookout for companies with low costs per gram. And, especially ones whose costs per gram are decreasing over time. The most expensive marijuana is not always going to offer the best profits and performance, and the marijuana price index does not impact every business in the same manner. This will give you a good idea of who is likely to enjoy price advantages in the coming years.
Earnings per share: By looking at a company’s earnings per share (EPS), you can get an idea of that company’s profitability. This is calculated by subtracting preferred dividends from net income and then dividing the difference by outstanding stockholder shares. Keep in mind that you may see a negative EPS for some marijuana companies. Don’t let this put you off.
Many companies in the industry aren’t profitable yet. Take a look at how the company is spending money. If funds are going toward investing and expanding operations, it may be a signal of future profitability.
How to Diversify Your Portfolio with Marijuana Penny Stocks
Marijuana stocks or cannabis stocks offer enormous potential for growth. But they are not without their share of risk. Marijuana companies face heavy competition and low prices from black-market sellers. Their business models completely depend on the political landscape. If governments decide to roll back on legalizing marijuana or enforce heavy taxes on products, growth will slow—a marijuana stock could become a hindrance instead of an asset.
Consider mitigating risk by diversifying your portfolio. You can do this by holding onto safer assets — like bonds, consumer staples stocks or REITs. In all, marijuana penny stocks can be a valuable contribution to your investments.
For more information about about penny stocks and penny stock trading, visit the U.S. Securities and Exchange Commission at www.sec.gov.
Continue reading: BEST US CANNABIS STOCKS
Benzinga's #1 Breakout Stock Every Month
Looking for stocks that are about to breakout for gains of 10%, 15%, even 20% potentially or more? The only problem is finding these stocks takes hours per day. Fortunately, Benzinga's Breakout Opportunity Newsletter that could potentially break out each and every month. You can today with this special offer: