TM editors' note: This article discusses a penny stock and/or microcap. Such stocks are easily manipulated; do your own careful due diligence. 

There are 8 categories within the overall cannabis market that are well worth your attention as the stock performance of each category has varied considerably ranging from +1.8% to -32.6% in October versus an overall marijuana market decline of 12.8%. That is a dramatic spread and one worth understanding as you position yourself in this burgeoning market sector.

The 8 baskets of marijuana stocks/ETFs consist of:

1. The Marijuana & Marijuana-related ETFs Category

This category consists of 15 ETFs of which 2 are US-centric (HMUS; USMJ), 2 are leveraged plays (HMJU; HMJI), 2 are marijuana/marijuana-related plays (ACT; MJ) and the remaining 9 are more broadly based and 6 of the 15 are passively managed and 9 are actively managed.

7 ETFs have been added over the course of 2019 making historical performance comparatives for all periods impossible except for the July/August/September periods but some interesting results are noted:

• the total basket of ETFs, in total (excluding the leveraged ETFs), declined 8.2% in October following on the heels of  -20.9% in September and -11.8% in August.
• the passively managed pure-play ETFs (HMUS, HMJR, HMMJ, THCX, and POTX) declined 11.2% in October, -14.7% in September and -12.5% in August.
• the actively managed pure-play ETFs (MJJ, YOLO, CNBS, TOKE, SEED & USMJ) declined 9.2% in October, -14.6% in September -12.4% decline in August.
• the very diversified ETFs (ACT & MJ which contain a large number of tobacco, alcohol, packaged goods consumer and pharmaceutical companies) declined 3.2% in October, -10.0% in September and -9.3% in August.
• the 2x daily bull ETF declined 26.3% in October, -29.5% in September and -30.5% in August.
• the inverse ETF increased 9.4%in October, +12.0% in September and +12.2% in August.

For more insights into marijuana ETFs please read this recent article posted on TalkMarkets.

2. The CBD/THC Extraction Stocks Category

This category consists of 5 companies (LABS, VGWCF, RTI, NEPT and OILS(OILFF)) that function as the middle-man of sorts in the cannabis supply chain purchasing dried cannabis, extracting the oil-like substance containing THC or CBD from the plant, and selling it back to the same producers, or to other producers that have requested cannabis extract. The category has received a lot of hype with the suggestion that its stocks are poised to capitalize on what could be the next big cannabis investing trend – extracted products but it has been in decline since its peak back in March/April.

This basket of stocks, on average:

• increased 1.77% in October, -16.9% in September and -17.3% in August

For more insights into vaping-related stocks please read this recent article posted on TalkMarkets.

3. The Marijuana-infused Beverage Category

Established beverage companies, as well as entrepreneurs, are developing formulas and methods for infusing CBD or THC, or both, into beverages in hopes of becoming the next "monster" of the rapidly emerging cannabis beverage market but no company stands out, as yet, as the company to invest in.

This basket of 9 stocks (NBEV, BEV, ZENA(ZBISF), QRSRF, SPR, DIXI.U, BEER, KBEVF, and GYSRF), on average:

• declined 19.7% in October, -10.8% in September and -14.8% in August 

For more insights into marijuana-infused stocks please read this recent article posted on TalkMarkets.

4. Cannabis Companies Concentrating on Europe Category

The CBD industry will grow more than 400% through 2023 in Europe making it the largest legal cannabis market in the world and the following companies consider this to be a great opportunity to enter and/or expand through Europe.

The basket of 7 stocks (STIL, ALEAF, ELXR, WRLD.U, TGODF, AGRA(AGFAF)and RQB), on average:

• declined 32.2% in October, -29.9% in September and -2.4% in August

5. The Marijuana-related Consumer Products/Pharmaceutical Stock Category

This category consists of 14 consumer products (tobacco, alcohol, food) and pharmaceutical companies that are directly involved in the cannabis sector. 5 (ABBV, MO, CODI, IMBBY, ACNFF) pay dividends ranging from 5-8%; 5 (TAP, BUD, IIPR, NVS, SMG) pay dividends ranging from 2-5%, 2 (STZ; ASBFY) pay dividends between 1% and 2% and 2 (PYX & ATD.A) don't pay any dividends.

This basket of 14 stocks, on average:

• declined 5.2% in October, increased 0.9% in September and declined 7.2% in August

6. The Vaporizer Manufactures, Vape Extract Suppliers & Vape-related Stock Category 

There are 3 ways to play the cannabis vape market: choose to buy the vaporizer manufacturers and suppliers (KSHB; VPRB; GNLN; MCIG; OGI; WCIG), go after the recurring revenue provided by the extract suppliers (CRON; SPRWF; VAPNF) or invest in the less volatile vape-related big tobacco companies (MO; IMBBY; BTI; PYX; JAPAY; TPB; VGR).

• The basket of 6 vaporizer manufacturers, on average, increased 11.76% in October, -41.3% in September and -25.9% in August
• The basket of 3 extract suppliers, on average, declined 14.2% in October, -22.1% in September and -16.8% in August
• The basket of 7 vape-related tobacco companies, on average, declined 0.75% in October, -8.7% in September and -2.9% in August

7.  The Long-term Warrants Category

While there are 25 warrants that trade on various stock exchanges only 2 are sufficiently long term to consider investing in, namely, SUGR.wt and FONE.wt with expiry dates of 46 and 28 months, respectively.

• The SugarBud Craft Growers Corp.warrant declined 50% in October after having declined 50% in September
• The Flower One Holdings Inc. warrant declined 5.8% in October after having declined 22.7% in September

For more insights into warrants please read this recent article posted on TalkMarkets.

8. The Rights Offering Category

Zenabis Global Inc.'s action in October to raise additional capital with a 4 week long Rights Offering (ZENA.RT) - a privilege granted to a shareholder to acquire a pro-rata portion of additional shares of the issuer's stock directly from the issuing company at a specific price per share which is typically set at a discount to the recent trading price of the issuer's stock - caused the stock to decline by 74.7% by the end of October and has declined a further 20.8% as of today.

• The Rights were introduced on October 30 and declined 8.3% during the last day of October and have already declined another 27.3% to date this week.

For more insights into Rights Offerings please read this recent article posted on TalkMarkets.

Conclusion

Personally, I am inclined to invest in the most diversified, least volatile plays and that suggests serious consideration be given to the Advisor Shares VICE ETF (ACT) which only declined 0.21% in October following a decline of only -1.5% in September and -3.5% in August (and up 10.2% since the beginning of 2019). I also think the SugarBud warrant warrants one's consideration as it presents considerable leverage to that of its associated stock. 

Which approach you take to investing in the pot stock sector is up to you but I hope the above analyses help you decide which category is best for you. (Incidentally, you might want to forward this article to your portfolio manager/financial adviser as such insights into the fledgling market are not available elsewhere.)