Underestimated CBD market is the key to HEXO shares

Underestimated CBD market is the key to HEXO shares

<p>You know you’re writing too much about marijuana when a search for sector players like Hexo (NYSEAmerican: HEXO) brings up your own articles. And you really know you’re going overboard when other analysts cite your work as an expert opinion. But this “everything works” dynamic really points to the broader possibility in the HEXO share.

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If I wrote about an established blue-chip name like Altria (NYSE: MO), I would probably be able to search for several days before my last article on the subject comes up. Everyone is talking about Altria. Adding another opinion on the subject is like liberating yourself in the Pacific. It means something, but only in a technical sense.

On the other hand, discussing HEXO is like freeing yourself in the jacuzzi. It does matter, especially if the jacuzzi water originally did not have a yellowish tinge.

What’s the point of my biological analogies, you ask? Small measures can have a major impact on young markets. This feeling applies in both directions, as the HEXO share price recently showed.

From year to day, the cannabis company’s shares are still at surprisingly high levels. However, since the end of April 29, the Hexo share has fallen 24% in the markets.

Part of the reason why capital collapsed is the same motivation for why other marijuana stocks have become volatile: good old-fashioned profitability. With the Hexo share doubling just over a month ago, early investors were saved.

Second, as InvestorPlace contributor Ian Bezek pointed out, HEXO and other cannabis players have a credibility issue. You can not have a market capitalization in billions and revenues in millions indefinitely.

But once the profit margins in the Hexo stock fade, I would consider going long for one reason: cannabidiol.

Underrated opportunity

We have passed the childhood phase of the cannabis revolution, which is participatory. Of course, this low-hanging fruit did not last to grow marijuana is not rocket science. The companies now differ through marijuana specialties, such as mass production or cultivation of medically effective strains.

How is HEXO different from the packaging? The answer is cannabidiol or CBD.

This is not a new argument. It’s actually quite old. As our own James Brumley noted early this year, CBD-infused beverages constitute a crowded market. It is also a very modest size when it comes to revenue. Thus, critics have argued that this trend is a fad.

On the surface, this circumstance bodes ill for the HEXO share price. The underlying company has signed a promising venture with Molson Coors (NYSE: TAP) to produce CBD-infused beverages. But that potential dies if this niche does not take off.

Admittedly, early signs do not look encouraging. However, this is still a very young market where a series of small measures can trigger something massive.

I am particularly interested in the medical potential of CBD. According to contributing editor Peter Grinspoon of Harvard Health Publishing, there is some evidence for the therapeutic claims of the cannabis plant. Dr. Grinspoon even cites research on the effects of marijuana on traumatic brain injury.

The obvious warning is that more evidence is needed to establish CBD as a genuine therapeutic platform. That is still what makes CBD and indirectly Hexo stocks an exciting proposal. We do not yet fully understand marijuana because regular research on the plant is still relatively scarce. But the fact that at least some positive data is available is undeniable.

That’s also why I do not think CBD-infused drinks are a fad. This is not the taste of the week. Instead, the mainstreaming of CBD may eventually catalyze a paradigm shift in cannabis perceptions.

Patience can go a long way with Hexo Stock

While Dr. Grinspoon’s article is a recommended reading, I recommend that you read the comments section.

One caught my eye. One reader claimed that her mother was suffering from severe pain and demanded that opioids survive. But with CBD and other cannabis-related drugs, she can enjoy a better quality of life.

Instead of blowing someone up for using untried alternative therapies, Dr. encouraged In my opinion, it is very telling to come from a doctor who is deeply embedded in the regular healthcare system.

If you ask me, it seems that doctors prefer natural CBD products over exotic pharmaceutical compositions.

But this is not a license to jump aboard Hexo without fully appreciating the risks. The HEXO share price can rise or erode just as quickly. Like I said, it’s a young market: an unwelcome current can put an immediate damper on your relaxing jacuzzi.

But if you go into science and data, it’s more likely that all surprises will be positive. Therefore, I am interested in taking some significant declines in HEXO as long-term buying opportunities.

At the time of writing, Josh Enomoto had no position in any of the above securities.