While 86 percent of individual investors are concerned about a global recession over the next 12-18 months, they remain bullish on the cannabis sector. The second Cannabis Investor Survey was conducted by KCSA Strategic Communications, an integrated strategic communications firm specializing in public relations, investor relations and social media, and surveyed more than 300 individual cannabis investors. The survey found that despite a difficult summer for cannabis stocks, individual investors remain bullish on cannabis even against the backdrop of a looming recession.
Why Cannabis Is Recession-Proof
Nearly 60 percent of individual investors surveyed believe that cannabis will remain a strong growth sector, even in a broad economic downturn, making it an attractive investment opportunity. Only five percent of individual investors plan to sell their cannabis investments in the event of a recession, while the majority would either hold or purchase additional cannabis stocks. More specifically, 27 percent of individual investors stated that they would invest more money, while 68 percent would choose to simply hold onto their current positions.
“At a time when many investors are concerned the economy is potentially moving towards a recession, they continue to view cannabis as a safe investment. While we find this reassuring, we encourage investors to apply the same rigor they place on their other investments; a strong management team, solid balance sheet, well-articulated business plan and exceptional execution,” said Jeffrey Goldberger, Principal and Managing Partner at KCSA Strategic Communications. “Underlying these positive attributes is management’s ability and willingness to consistently and transparently communicate with all stakeholders.”
Acknowledging the Summer Stock Struggles
After a turbulent summer for cannabis stocks, making money from investing in cannabis has become challenging. Compared to KCSA’s previous investor survey from May 2019, the number of investors who reported making money off cannabis stocks dropped from 90 percent to 40 percent.
As a result, individual investors are now spreading their bets across a number of cannabis companies, instead of putting their eggs in one basket (i.e. stock). Roughly 32 percent of investors polled reported owning shares in ten or more companies, while about 18 percent have positions in six to nine companies.
Individual investors remain bullish on cannabis but are undoubtedly more cautious than they were six months ago. According to the survey, there has been a 30 percent drop in investors who have more than $100,000 invested in cannabis, suggesting larger investors are selling off to lock in profits and to pare losses.
However, cannabis investors consider the sector a long-term investment, with 88 percent of investors planning to hold their investments for 1-10 years, which is similar to the previous report.
“As an industry, cannabis is gaining momentum more quickly than most anticipated; the challenge remains the current regulatory environment. The capital crunch cannabis companies face today could be addressed with the passage of the STATES Act, SAFE Banking – with a capital markets tweak – or rescheduling,” added Lewis Goldberg, Principal and Managing Partner at KCSA Strategic Communications and host of The Green Rush podcast. “The fact that the cannabis capital markets are currently dominated by retail investors has amplified share price fluctuations. The reality is, both individual and institutional investors are committed to investing in the cannabis market. Nearly everyone understands this is a long term, conversion play, and these companies are committed to turning an historically illicit market into a regulated, taxed industry.”
2020 Legislation Will Catapult Growth
Many individual investors are monitoring legislation like the SAFE Banking Act, which could open the door for more substantial cash flow. In fact, 54 percent of individual investors plan to increase their cannabis investments if the SAFE Banking Act was to pass in early 2020, as is speculated by industry insiders. Additionally, if and when cannabis is made federally legal, 68 percent of individual investors reported they will increase their investment in the cannabis space.
KCSA’s Cannabis Investor Survey, which was analyzed in September 2019, collected data from more than 300 individual investors currently investing in cannabis. The net worth of the respondents varied in range, with 36 percent citing a net worth of between $100,000 and $500,000 and another 36 percent citing more than $500,000.
About KCSA Strategic Communications
KCSA is a fully integrated communications agency specializing in public relations, shareholder communications and social media, with expertise in cannabis, financial and professional services, technology, healthcare, digital media and energy. Since 1969, the firm has demonstrated strategic thinking and program execution that drives results for its clients in the ever-changing communications and digital landscape. The firm’s clients are its best references.
KCSA’s cannabis practice, which is one of the largest in North America for public relations, investor relations and social media, has been representing companies in the cannabis industry for more than five years. Clients span the entire supply chain from companies that grow the plant, process it and dispense it, to companies that provide consulting services, financial services and even ancillary products such as lighting, nutrients and packaging.
To listen and download The Green Rush podcast, please visit www.greenrushpodcast.com.
SOURCE KCSA Strategic Communications