Why CBD Stocks Offer Investors COVID Shelter

Why CBD Stocks Offer Investors COVID Shelter

Investors can’t escape “health” related headlines these days. Most concern the perils to our physical health as a result of the COVID-19 pandemic.

Many headlines, however, are focused on our financial health. In particular, the question now asked is where can investors find shelter in ultra-volatile markets that have cratered from their recent highs?

While cannabidiol (CBD) is not a treatment for the novel coronavirus, CBD stocks could be a potent “medicine” to help stop the bleeding in investor portfolios.

There are several reasons for viewing CBD commerce as being (relatively) sheltered from the economic repercussions of COVID-19. These relate to both the cannabis sector in general, and the CBD sub-sector in particular.
 

  1. As an emerging industry, cannabis has virtually zero international trade being disrupted by COVID-19. Rather than facing steep losses of existing revenue streams, the cannabis industry merely faces (COVID-related) delays in opening up these international markets.
  2. Similarly, the supply chain for the cannabis industry has a very small international trade component. Cannabis (and CBD) operations have minimal vulnerability to supply chain disruptions.
  3. As both a health supplement and medicine, CBD is relatively immune to the depressionary economic impact of the COVID-19 pandemic. Health-related spending is one of the last areas where people make budget cuts in an economic downturn.
  4. The intense desire of many/most people to strengthen and fortify their health during the coronavirus pandemic should stimulate CBD demand even further.

International trade has been severely impacted by the COVID-19 pandemic. In an era of globalization, this has a significant (if not severe) impact on almost every sector of the economy. The emerging cannabis industry is one of a very small number of exceptions.

Here, delays in opening up international markets by (still) cannabis-phobic governments now works in favor of the cannabis industry. Simply, the cannabis industry is losing very little revenue as a result of COVID-19 disruptions to international trade. The cannabis (and CBD) market is still a domestic market.

Cannabis (and CBD) operations are also almost entirely domestic operations. The agriculturally-based cannabis industry has a relatively simple supply chain – and nearly all of these inputs can be supplied domestically. No COVID-19 disruptions here either.

Then there is the allure of CBD products themselves, even during a full-blown economic depression. CBD products – and the markets for those products – have surged into prominence for two simple and closely-related reasons.
 

a)  Western consumers have become increasingly health-focused (even prior to COVID-19)
b)  CBD products – used either medicinally or as a health supplement – are relatively inexpensive

One of the most-obvious indications of the increasing focus on health by consumers is the soaring spending on dietary supplements aimed at improving health.
 

Dietary Supplement Use Reaches All Time High

…More than three quarters of Americans are taking dietary supplements each year—a crystal clear trend that serves as an indicator of the vital role supplementation plays in their overall health and wellness regimens,” said Nancy Weindruch, vice president, communications, Council for Responsible Nutrition (CRN).

Within this soaring market for health supplements, CBD products are now leading the way, as indicated in this 2019 article.
 

A new market report shows CBD sales surging in the U.S. herbal supplement category. Up from almost total obscurity, CBD leapt into the No. 12 spot among best-selling herbal dietary supplements in 2017 with a 303 percent growth compared to the year prior. And between 2017 and 2018, CBD outdid even those numbers, catapulting itself to the top spot on the list of best-selling supplements and dethroning turmeric from the No. 1 rank it held for five consecutive years. The report, in other words, shows CBD sales are soaring and disrupting long-standing trends in the $8.8 billion herbal supplement industry.

Boosting the appeal of CBD products is that they are relatively inexpensive versus many dietary supplements. CBD-rich cannabis (~20% CBD content) can be commercially cultivated at less than $1 per gram. Pure CBD can be produced for approximately $5 per gram.

However, it wouldn’t matter how economical CBD is if it wasn’t also seen by consumers as offering a multitude of benefits.
 

7 Benefits and Uses of CBD Oil (Plus Side Effects)

Cannabidiol is a popular natural remedy used for many common ailments.

Better known as CBD, it is one of over 100 chemical compounds known as cannabinoids found in the cannabis or marijuana plant, Cannabis sativa (1Trusted Source).

Tetrahydrocannabinol (THC) is the main psychoactive cannabinoid found in cannabis, and causes the sensation of getting “high” that’s often associated with marijuana. However, unlike THC, CBD is not psychoactive.

This quality makes CBD an appealing option for those who are looking for relief from pain and other symptoms without the mind-altering effects of marijuana or certain pharmaceutical drugs.

CBD oil is made by extracting CBD from the cannabis plant, then diluting it with a carrier oil like coconut or hemp seed oil.

It’s gaining momentum in the health and wellness world, with some scientific studies confirming it may ease symptoms of ailments like chronic pain and anxiety.

Here are seven health benefits of CBD oil that are backed by scientific evidence…

That was the picture of the market for CBD products pre-COVID. In a world now obsessed with health (and becoming more resistant to infection), how/why can we expect demand for CBD products to grow even faster?

This March 23, 2020 article from Chiropractic Economics lays out some details.
 

The four reasons why COVID-conscious consumers may accelerate their purchases of CBD products even further?
 

i)   Increasing natural killer cells
ii)   Supporting a healthy inflammatory response
iii)   Maintaining a healthy gut microbia
iv)   Alleviating stress/anxiety

CBD doesn’t cure COVID-19.

However, as consumers gravitate toward CBD products as a health-boosting tool to fight this pandemic, CBD stocks can become an effective investor antidote to the general collapse in equities.

Published at Wed, 08 Apr 2020 18:12:27 +0000