Worldwide, investors are seeking excess returns on their investments. In an economic environment where returns are growing slimmer, there is one industry that is demonstrating rapid

growth and attractive returns, cannabis. As the general population changes it’s perspectives and is recognizing the benefits cannabis offers, and governmental policies begin to shift on what was once considered a “gateway drug”, this new market is still in its infancy. But which segments have the greatest potential for growth?

Each week, yet another research firm publishes reports touting higher estimates for future growth within the cannabis

industry. Better still, current growth rates are outpacing even the highest of them. Springtime reports from ArcView Market Research estimate the industry will approach $57 billion by 2027, while Grand View Research suggests total available market could exceed $140 billion as soon as the end of 2025. There’s no doubt that tremendous opportunity exists in this newly created space, but is it too late to get in on the cannabis industry? Never. Most of the market activity is focused on Canada’s upcoming legalization of adult use marijuana, but the truth is, the long-term growth won’t come from retail marijuana or cultivation. Industry analysts have done the math and Canada is expected to reach an oversupply of cannabis within only two or three years post-legalization. An oversupply will cause a significant price-drop and have a huge impact on all of the over-hyped and overvalued LP’s currently dominating the market.

Geographically, legalized cannabis has seen a steady decrease in price per gram, effectively slimming profits and creating an environment for producer shakeout as the market stabilizes and oversupply hits. Take Oregon as an example. Growers were expecting to get around $1,500 per pound while they were cultivating their first legal crop. By the time harvest came, the price per pound had dropped a staggering 50% and now the state sits on a 1 million pound surplus of cannabis. As Q4 2018 rapidly approaches. the following segments show impressive growth potential due to their deep roots in technology, regulations, and medical breakthroughs.

Biotech

Biotech companies are focused on clinical research and development of cannabinoid medicines. It’s currently the largest sector in the U.S. and is expected to be a disruption to many of Big Pharma’s biggest players. Unless larger pharma companies get to the patented breakthroughs in medicine first. That’s exactly what happened with GW Pharmaceuticals (GWPH) back in June when the FDA approved their hemp-derived CBD drug, Epidiolex, for the treatment of childhood seizures. Recently, in late-September, the DEA officially rescheduled Epidiolex from a schedule I drug to a schedule V drug, essentially paving the way for more CBD drugs to be approved in the future.

Multiple companies have CBD drugs that are already in phase II and phase III clinical trials. What will set certain biotech companies apart from others? Companies that can execute clinical trials successfully and acquire patents for more efficient and targeted methods of administering cannabis medicines will be the ones who quickly rise to the top. Beyond the large-scale marijuana producers jockeying for position, biotech companies are among the most competitive in the industry. Biotech stocks focused on developing new medicines have much greater long-term potential compared to the over-hyped adult use market in Canada. However, they can only realize their potential if they can actually succeed in getting their drugs approved and marketed.

Industrial Hemp

Industrial hemp was once the cash crop for American farmers and now it’s making a much-needed return. Many investors see attractive opportunity in just the dispensaries and cannabis farms, but what many have not yet realized is the potential market size for industrial hemp. Industrial hemp can be used to produce nearly 30,000 different types of products. Battery cells, pharmaceutical products, biodegradable plastics, fuel, fabric, and construction materials are just a few examples of hemp products. All eyes are currently on the Hemp Farming Act, but if Congress can’t agree on SNAP benefit policies in the 2018 Farm Bill, it could mean waiting until next year for new hemp regulations to roll out. That means investors may still have a chance to get in on this great opportunity.

Tech & Media

Companies that provide innovative technologies, software, and media for cannabis companies and consumers are sure to experience rapid growth. Remember, this is the first time the world has ever seen a legal marijuana market and technology is playing an increasingly important role in improving efficiency and cutting costs for producers and processors. Media is right in the thick of it all. Currently, platforms like Google, Facebook, and YouTube are censoring most cannabis marketing, thereby reducing competition in the space. The bans have led to iconic companies like High Times, who recently acquired Dope Media, to go public along with a host of other organizations and companies to stake a claim in the marijuana media market.

Moving into Q4, there are two major catalysts expected to generate explosive growth for the cannabis industry overall. October 17th, Canada will begin national commerce of adult use marijuana. In the U.S., all eyes are on the Hemp Farming Act to be included in the 2018 Farm Bill. If passed, it would create a regulated hemp industry in the U.S. and clarify the legality of CBD once and for all. The bulls are pushing the market higher and it’s unclear exactly where or when the bubble will burst for overvalued LP’s. These 3 sectors, however, offer the best opportunities for savvy investors willing to take a risk for what could be potentially huge rewards.