How COVID Has Shaped These Two Sectors of The Cannabis Industry
While most investors tend to focus on only a few top pot stocks to watch, they often forget to look at the larger cannabis industry. Although finding a few marijuana stocks to buy can be a solid choice for some, it’s worth researching where the industry is headed to make a fully educated decision. With that in mind, there are two leading areas of cannabis stocks that investors are focused on. On one hand, we have the MSO marijuana stocks. MSOs or multi-state operators work by owning and operating retail cannabis stores around the U.S.
While some are vertically integrated and grow their own cannabis, others simply sell products that they buy from distributors. These companies have shown themselves to have a great deal of potential as pot stocks to watch. On the other hand, we have ESPs or extraction service providers. These pot stocks have been able to show very substantial gains in the past few months as Canada legalized the use of derivatives at the beginning of this year. With so much untapped potential here, both areas are worth taking a closer look at.
The Case For MSO Pot Stocks To Watch
MSOs have shown a lot of potential in the past few months. With demand for marijuana shooting up with the COVID pandemic, more people than ever are buying marijuana at dispensaries. Leading MSO pot stocks like Green Thumb Industries Inc. (OTC:GTBIF) and Trulieve Cannabis Corp. (OTC:TCNNF), have been able to grow substantially since mid-March. These leading pot stocks have directly benefitted from the increase in demand stated above.
Although MSO pot stocks are capital intensive in that they need to first acquire real estate, they can be extremely profitable. MSOs have shown greater profitability than almost any other area of the cannabis industry. For this reason, these marijuana stocks to watch have remained wildly popular amongst investors. Currently, we are just tapping the surface of their potential. Investors believe that some leading MSOs could reach almost $1 billion in sales within the next few years or sooner. Because of this, MSOs should be on any pot stock investors watchlist.
The Case For ESP Marijuana Stocks
Extraction Service Provider pot stocks have a similar amount of opportunity as MSOs. These companies work by producing extract products either on a contract or for their own sales. One of the many benefits of ESPs is that extraction products have much higher margins than other traditional cannabis sellers. In Canada, ESPs like MediPharm Labs Inc. (OTC:MEDIF), are just beginning to take advantage of what is known as Cannabis 2.0.
This occurred at the beginning of the year when Canada legalized the production and sale of derivative products. While profitability can be much easier for these companies, they have several other factors going for them as well. This includes the fact that a lot of these pot stocks operate on long term contracts. This means that there is guaranteed income for a period ranging in the 2 to 5-year range. For that reason, investors continue to view ESPs as marijuana stocks to watch.