If you’re looking to add high-profit potential stocks to your portfolio, you should consider biotech and cannabis stocks. These hot sectors offer a lot of upside, but where there’s strong profit potential, there’s typically a considerable amount of risk. Successful entrepreneur and investor Adam Adler is going to share his approach to investing in biotech and cannabis stocks.
“Cannabis and biotech stocks offer a ton of upside, and if you make the right picks, you could enjoy huge gains,” Adam Adler notes. “When evaluating companies in these sectors, one of the first things I look at is their product, and the size of the market for their products.”
Biotechnology is a vast field and many companies are working on a huge variety of different solutions. Determining the market size for a product can be difficult, especially in a field as complex as biotech.
Still, it’s important to look at the size of the potential market to properly evaluate a company. A niche product, say a treatment for a rare disease, may change and even save lives. Yet if only a few hundred people suffer from the rare disease, the upside from the investor’s point of view might be rather limited.
As for cannabis, the industry has boomed in recent years, and in many states, recreational marijuana is now legal. As more companies enter the market, competition increases, and securing market share grows more difficult. If a company is going to lock up a lot of market share, its products must truly stand out.
Besides investing in companies that grow marijuana, investors should also consider companies that service growing operations.
“Companies that support marijuana growers may offer a lot of upside and in some cases, there are fewer legal hazards,” Adam Adler points out. “A biotech company that has developed extremely effective fertilizers or a patented growing system that outperforms the competition can tap into the upside of the marijuana market while not having to worry as much about interference from the government.”
Biotech products are often very complex and must meet a variety of regulatory requirements. The exact implications will vary based on the application. Anything involving health is often tightly regulated, for example.
“Health products offer a ton of upside, but the regulatory environment is very nuanced,” Adam Adler says. “Meanwhile, the federal government has thus far turned a blind eye to marijuana operations on the right side of state laws, but there’s no guarantee that they’ll continue to use a soft touch.”
Make sure you consider all the above when investing in biotech, marijuana, and other high-profit, high-risk industries.