However, controversies aside, the cannabis industry is creating some interesting opportunities for investors. More businesses are developing medical and consumer healthcare products using the young commodity. And consequently, market forecasts indicate potentially explosive growth over the next decade.

With that in mind, let’s dive into the world of UK cannabis stocks and see which businesses are leading the charge.

What are cannabis stocks?

As the name implies, cannabis stocks consist of any business using marijuana to create a legal product for other companies or consumers. The sector is still in its infancy, but it can be broken down into three primary categories:

• Growers & Retailers – Companies creating consumer products with cannabis.
• Medical – Pharmaceutical and biotech firms creating medicinal marijuana products for patients.
• Ancillary – Groups providing products or services to other cannabis companies.

As such, there are a vast number of products coming out of this young industry, including food, beverages, lotions, oils, perfume, and medicine, just to name a few.

Typically, a commodity with this many applications doesn’t create a high barrier to entry. However, in the case of marijuana shares, the story is quite different. The regulatory environment surrounding cannabis in most nations is unsurprisingly strict. And the UK is no exception.

Most cannabis-based products require regulatory approval before they can be sold to consumers. And in the case of UK medical marijuana firms, additional authorisation from the Medicines and Healthcare Products Regulatory Agency (MHRA) is also necessary, which can be both time consuming and expensive.

Needless to say, this does elevate the risk profile. And subsequently, cannabis shares are often synonymous with volatility. But there are also stories of immense growth potential, so the risk does come with potentially higher rewards for investors.

With that in mind, here are five leading United Kingdom marijuana stocks in order of market capitalisation.

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Top marijuana shares in the UK

Associated British Foods

Associated British Foods is not the most well-known cannabis stock. After all, this is the company behind many popular food brands, including Kingsmill bread and Blue Dragon cooking sauces. It’s also the parent company of clothing retailer Primark.

However, in 2017 the group’s subsidiary, British Sugar, signed a deal with GW Pharmaceuticals to supply M250 marijuana for drug development purposes. M250 contains high concentrations of the active ingredient cannabidiol without producing a psychoactive effect. In other words, the plants can’t be harvested for recreational marijuana purposes.

Subsequently, Associated British Foods converted around 45 acres of tomato greenhouse space to grow hemp plants, making it one of the largest licensed cultivators in the UK.

Key Metrics:

• Market Cap: £13.16bn
• Average Daily Volume: 1.44m
• HQ: London, UK
• Cash/Debt: £2,307m / £3,687m

Futura Medical

Futura Medical is an early-stage research and development pharmaceutical company. The group focuses on novel treatments aimed at sexual health and pain relief using its proprietary DermaSys technology.

This enables active pharmaceutical ingredients to be formulated into a gel absorbed directly through the skin. As such, it’s a highly targeted solution that’s proving to be successful with its flagship MED3000 erectile disfunction treatment and its TPR100 non-steroidal anti-inflammatory treatment.

However, as it turns out, DermaSys is entirely compatible with cannabidiol. And the company has since begun developing a new gel called CBD100 in a joint venture with CBDerma Technology. While it’s still in the early stages of development, initial lab testing showed promising results for this future cannabis stock.

Consequently, management has begun exploring commercialisation options for new cosmetic, dermal, and pain relief treatments using cannabidiol as the primary ingredient.

Key Metrics:

• Market Cap: £89.06m
• Average Daily Volume: 656.35k
• HQ: Guildford, UK
• Cash/Debt: £1.02m / nil

Deepverge

Deepverge is a specialist vertically integrated human-skin-testing technology business. Its proprietary platform, Labskin, grows tissue that mimics the naturally occurring microbiome of good and bad bacteria found in the real world.

Using Skinlab, cosmetic, pharmaceutical, and other healthcare-related companies can test consumer products on human-like skin in a real-world environment without exposing any individuals to potential health risks.

With new cannabidiol oils and skincare products entering the markets, demand for the group’s technology to test these products is rising. In recent years, Deepverge has signed contracts with various leading European beauty, household, and hygiene product manufacturers integrating cannabidiol into their product portfolios.

While the company does sell a handful of cannabis-based products such as creams and wound dressings for pain relief, the long-term strategy for this marijuana stock is to focus on offering Labskin as a service to the cannabis industry and the healthcare sector in general.

Key Metrics:

• Market Cap: £31.86m
• Average Daily Volume: 702.67k
• HQ: Malahide, Ireland
• Cash/Debt: £1.44m / £2.55m

Kanabo

Kanabo is a producer and retailer of cannabidiol-based products for the health & wellness consumer sectors. Alongside this retail activity, the cannabis stock has also designed a proprietary medical-grade inhalation system called VapePod.

The device consumes the company’s cannabis oil cartridges delivering high precision dosage to patients. This provides a controlled and safe method to prescribe medical marijuana to individuals suffering from chronic pain, sleeping disorders, and anxiety attacks triggered by post-traumatic stress or obsessive-compulsive behaviour.

After the completion of a successful pilot programme, management has begun ramping up production capacity, extending supply lines, and making strategic acquisitions within the European markets.

Key Metrics:

• Market Cap: £25.89m
• Average Daily Volume: 695.18k
• HQ: London, UK
• Cash/Debt: £0.36m / nil

Cellular Goods

Cellular Goods is an early-stage wellness business that offers a range of cannabidiol products. Its three primary product lines include a de-ageing face mask for skincare, a topical roll-on athletic gel for muscle recovery, and a recently launched collection of ingestibles to improve sleep patterns.

Unlike most product manufacturers within the industry, Cellular Goods does not use cannabidiol extracted from hemp plants. Instead, the cannabis stock uses a synthetic formulation manufactured within a lab. This unique approach makes the group less susceptible to farming disruptions while simultaneously being more ecologically sensitive.

The products have only recently made it to the market, and the company is expecting to report its first lump of revenue in 2022.

Key Metrics:

• Market Cap: £16.23m
• Average Daily Volume: 3.44m
• HQ: London, UK
• Cash/Debt: £10m / nil

Investing in the United States’ marijuana industry

American cannabis stocks have to navigate a more complex regulatory environment. Currently, 37 states have legalised marijuana for medical use, with 18 allowing for recreational purposes as well. However, on a federal level, it remains a controlled substance which significantly limits the geographic expansion of these businesses.

In April 2022, the US House of Representatives passed a new bill to legalise cannabis on a federal level. This bill is now en route to the Senate, where it will either be rejected or signed into law. Assuming it’s successful, the US marijuana industry could be set to boom.

Some leading American cannabis stocks in order or market cap are:

1. Jazz Pharmaceuticals (NASDAQ:JAZZ)
2. Scotts Miracle-Gro (NYSE:SMG)
3. Innovative Industrial Properties (NYSE:IIPR)
4. Hydrofarm Holdings Group (NASDAQ:HYFM)
5. GrowGeneration (NASDAQ:GRWG)

Are cannabis shares right for you?

Just looking at these five cannabis stocks, an investor who bought equal positions in each over the last five years is probably quite disappointed. That’s because collectively, these shares have fallen by over 60%!

Seeing such poor performance from an unproven industry isn’t exactly surprising. And demonstrates the risks of being an early investor. That’s why investing in marijuana stocks is not suitable for everyone.

Having said that, industry forecasts predict enormous growth over the next decade. If these prove to be accurate, the cannabis market could be an explosive opportunity for risk-seeking investors.

We recommend taking a diversified approach. It’s pretty challenging to determine which companies will become future titans at this stage. And by owning a collection of promising businesses, the odds of finding a winner increase.

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Cellular Goods shares listed at 5p and shot up to approximately 20p. But as I write the stock price has fallen to just over 8p.

I’ve commented on the company before and highlighted that I was waiting for the euphoria to subside. I think the fall in the share price reflects the diminishing level of enthusiasm for the cannabinoid firm from investors.

As a general rule, I don’t get involved at or straight after an initial public offering (IPO). Especially if there are not many public companies I can compare the newly listed company to, which is the case for Cellular Goods.

The company has recently released an announcement but I’m still not convinced to buy the shares in my portfolio. For now I’ll watch from the sidelines but I reckon the stock is worth another look.

Latest developments

Last month, Cellular Goods announced the appointment of five new members to its team. This includes a Head of Process and Applied Sciences as well as two senior hires to its product development team. The company has also contracted two expert consultants to advise on the development of its pet care and skincare ranges.

Firstly, I was surprised to hear that it’s dipping its toe into the pet care market. I’m aware that the firm is young and ambitious but I’d thought it would be better to focus on getting the skincare range up and running.

Secondly, the company clearly has enough money from the IPO to strengthen its team. But for now, I reckon the pet care range is somewhat premature. 

The products

I think its worth noting that in its lengthy IPO prospectus, the company was initially targeting two product lines. The first being high-end skincare, and the second being athletic recovery products.

At this point, I’ll add that none of these have launched yet! So in reality, it has not proven that it can sell the items. Hence the firm is not generating any revenue and is loss-making.

It has the retired celebrity footballer, David Beckham, as an investor. I guess he could market the products, which could make them a success.

The company still states that it will launch the first of its skincare items in September 2021. According to the IPO prospectus, this includes a high-quality face-mask and serum containing synthetic CBD, which is the well-known cannabinoid. Well, I guess I’ll have to wait and see.

My view

The market is flooded with CBD products, so Cellular Goods faces stiff competition. As I mentioned, David Beckham’s celebrity status may help the products, but I think consumers are smart and know that he will gain financially from it.

I welcome the company improving its team. It’s a step in the right direction for Cellular Goods shares. After all, the new hires bring experience that can drive the firm forward.

I reckon the hype has died down around the stock and reality has set in. The products have yet to prove themselves and I’ll be watching closely to see how well they do. For now, I’m not buying the shares for my portfolio.

Since then, the stock has seen some pull-back. But is this an opportunity to add the company to my growth portfolio? Let’s take a look.

The first UK-Listed cannabis stock

Cellular Goods is a provider of premium consumer products based on cannabidiol (CBD) and is the first company to be listed on the London Stock Exchange to do so.

Rather than extracting CBD from hemp plants, the company uses synthetic CBD created in a lab. Why? Because the chemical supply is more consistent, ecologically sensitive, and scalable than relying on hemp plant growers.

The company is launching with two product lines targeting different segments of the cannabis market. The first is a face-mask & serum, and the second is a topical roll-on athletic recovery gel. Both of these products will be manufactured by Arcania Apothecary, which will act as a contracted manufacturing organisation (CMO).

The goal is to provide a premium series of products and leverage its quality to build a reputable brand over its vast number of competitors. As promising as that sounds, there are some considerable risks to consider.

Risks ahead

As it stands, the company has yet to sell any of its products. Meaning it currently does not generate any revenue. Its face-mask and recovery gel are both unproven products. And considering the market is already flooded with hundreds of CBD products by household names such as Holland & Barrett and Boots, Cellular has a tough road ahead.

Without any revenue, it’s difficult to judge the level of demand for its products or how sticky they will be with customers. To me, there are a lot of unknowns, and an unprofitable business with no existing revenue sources is quite a risky investment. Perhaps the realisation of this is why the Cellular Goods share price has been falling over the past few weeks.

The Cellular Goods share price: time to buy?

The legal UK cannabis market is still in its infancy. But its growth rates are quite impressive. In 2020, £300m was spent on CBD products. By comparison, there was only £119m spent on Vitamin-C related goods.

At current growth rates, the CBD market is projected to reach £1bn in sales by 2025. That’s an average 35% increase each year.

Needless to say, the sector shows a lot of promise for large returns. However, even at its current share price, Cellular Goods is just too risky an investment for my tastes.

Once more information is known about the performance of its products, I’ll take another look. But for now, I think there are safer growth stocks out there that better fit my portfolio.

But after a successful Initial Public Offering (IPO), Cellular Goods shares have been falling. For now, I’m watching the stock and I reckon the hype around this company may be subsiding.

Here are five things I’d consider before buying Cellular Goods shares myself.

#1 – The cannabis market

The cannabis market is a fast-growing one. I should highlight that cannabinoids make up a group of compounds produced by the cannabis plant. In fact cannabidiol, or CBD, is a well-known cannabinoid that many people are familiar with.

I think the reason CBD has been gaining popularity is that it can be used to treat a wide range of conditions. According to the company’s website, it can calm the mind, aid sleep and improve mood. These are just a few benefits so I’m not surprised why CBD is gaining traction rapidly.

#2 – Synthetic CBD

I think what sets Cellular Goods apart from its competitors is that it’s focused on creating synthetic CBD products. In simple terms, it’s CBD that’s created in the lab rather than derived from the plant.

So what are the benefits of synthetic CBD? Well, each batch is identical and traceable. It’s free from pesticides and impurities. In a nutshell, synthetic CBD is claimed to be a cleaner and greener way to manufacture the substance.

I’m glad to see that Cellular Goods has jumped on the issue of sustainability from the start. This means that institutional investors could include the stock in their ESG (Environmental, Social and Corporate Governance) sustainable investing portfolios.

#3 – The products

Cellular Goods is focusing on two product lines. The first being high-end skincare and the second is athletic recovery products.

It’s launching with three synthetic CBD products: a face mask, a daily skin serum and a topical sports recovery gel. The products will be sold on its website and through physical retail partnerships.

But do note that the company hasn’t actually sold any products yet! In fact, it expects to launch these in September. Cellular Goods could be successful, but for now it’s too speculative and risky for me. Its products haven’t been proven to sell to consumers. Therefore, it’s incurring costs and is loss-making.

#4 – High profile people

Also key, I feel, is that Peter Wall, the CEO of Argo Blockchain sits on the board as Non-Executive Chairman. It seems to me that he’s a bold advocator of early stage technologies and markets. Argo Blockchain shares have been in the limelight due to the recent rally in cryptocurrencies.

I can’t cover Cellular Goods without mentioning that sports star David Beckham owns a 5% stake. I guess it helps an IPO when there’s a high-profile investor involved.

#5 – Competitive market

CBD is increasingly popular right now, especially in the beauty industry. But this is a saturated market. High demand, along with Beckham’s high profile could work for Cellular Goods. Especially if he’s involved in the marketing campaigns. But I reckon, the company’s success will boil down to the quality of its products.

For now, I think Cellular Goods shares are a risky investment, but I’ll continue to monitor the stock.

Cellular Goods is a public facing cannabinoid company backed by David Beckham. It launched on Friday at 19p a share, but has since fallen to 12p. In its pre-market placing it was oversubscribed by 13 times. I think this is due to rising enthusiasm and excitement in the growing cannabis arena, along with Beckham’s influence.

A £1bn industry

The cannabinoid field is massive and growing rapidly. Cannabidiol (CBD) is one type of cannabinoid gaining popularity as it’s used to treat a multitude of health conditions. This includes inflammation and pain relief as well as mental health issues and sleep. While we derive some CBD products directly from the cannabis plant, others are synthetically created in a lab. Cellular Goods intends to make synthetic CBD products focusing on skincare and athletic recovery.

The Centre for Medicinal Cannabis has found that 1,300,000 British consumers are already using CBD products. It also estimates that the market, which is showing double-digit growth, could be worth almost £1bn a year by 2025.

However, the company hasn’t yet produced any products, so its investors are purely pinning their hopes on the potential for success. It also doesn’t plan to announce any products before September, which is a long time for shareholders to patiently wait.

Synthetic cannabinoids

The company claims that making the products in a lab affords a level of scientific precision that avoids pesticides and a more sustainable product. But on a cellular level, they’re bio-identical to plant-based cannabinoids.

I think the future success of this company will come down to the quality of its products and the success of its marketing campaign. Beckham owns 5% of the company through his investment company, DB Ventures. His athletic background and high profile might help propel the brand if he’s involved in the marketing, but I would imagine that’s unlikely.

Should I buy shares in Cellular Goods?

At the moment, I’ve no plans to invest in Cellular Goods. I think it’s too early to gauge how the company will progress. And I think there’s already quite a lot of competition out there. Even FTSE 100 heavyweight British American Tobacco is making inroads into the CBD market.

It’s well known that the health, beauty, and sports supplements sector is thoroughly saturated. I understand the appeal of CBD products and many people advocate they’re a great help for painful conditions such as arthritis. Therefore, I think it certainly has a chance at success. But it seems quite a risky investment at this stage. And I think there are plenty of other exciting stocks I’d prefer to add to my portfolio.

Is this a growth stock I should consider for my own investment portfolio? Let’s take a look at the investment case.

Cellular Goods: what’s all the fuss about?

Cellular Goods is an innovative company that’s developing skincare and athletic recovery products formulated with engineered cannabinoids. The company – which currently has a market-cap of around £65bn – is partly owned (5%) by global celebrity David Beckham through DB Ventures.

Cellular Goods’ USP is its products are lab-made. This means that every batch is identical and free from pesticides, contaminants, and impurities. The company plans to sell its products direct to consumers via its website and through partnerships with retailers. It says its supply-chain is ‘clean, green, short, and traceable’.

CBX is led by CEO Alexis Abraham who has experience in strategic branding, communications, and internet-enabled businesses. Meanwhile, its head of Research & Product Development is Alexia Blake, who is a pioneer in the North American cannabis industry with a proven track record of developing top products. She previously worked at MedReleaf Corp. MedReleaf was one of the first Canadian producers of medical cannabis to receive a license from Health Canada. Peter Wall, who is the CEO of Argo Blockchain, is chairman.

I’m bullish on cannabis

In a recent article on Kanabo Group, I explained that I’m quite bullish on the prospects for the legal cannabis industry as a whole. Cannabis isn’t a cure, but is being touted as having some impact — however small — when treating a wide range of conditions. These conditions include Alzheimer’s, Parkinson’s, arthritis, chronic pain, epilepsy, anxiety, and depression. Between now and 2026, the global legal cannabis market is projected to grow at an annualised rate of more than 30%. This means there should be plenty of opportunity for astute investors.

Having said that, I have reservations about investing in Cellular Goods shares. For starters, the company hasn’t sold any products yet. This means its products are unproven. It also means there’s no revenue at present. This adds a lot of risk to the investment case, in my view, as we simply have no idea how high sales will be. So, determining the right valuation for the company isn’t easy. 

Another issue is that it’s hard, at this stage, to determine if the company has a genuine competitive advantage. Having done some research, I think it’s likely that, in the years ahead, we’ll see more lab-based cannabis products come to the market.

CBX shares: should I buy?

Weighing everything up, Cellular Goods shares are too risky for me right now. The company certainly looks to have growth potential. However, there are many unknowns.

All things considered, I think there are other, safer growth stocks I could buy right now that are a better fit for my portfolio.