During Quarantine of 2020, we have seen some new normals such as Online D.J. Events, Family Tik Tok Challenges, Facebook Card Parties and many of them are infused with adult-beverages and cannabis. Historically alcohol, tobacco, and marijuana have always been used as stress relievers during times of unrest. Most of us are forced to remain in our homes with no businesses to patronize, no work or school, and limited resources. So what else can we do, drink and smoke? Fortunately, for brands such as Altria Group, Constellation Brands, and Canopy Growth sin products are outperforming in a bearish market. Cannabis, Alcohol, and tobacco are all considered non-cyclincial stocks.
Whether a company is cyclical and non-cyclical stocks are determined by how much correlation a company’s share price is to economic fluctuations. Cyclical stocks and their companies have a direct relationship to the economy, while non-cyclicals repeatedly outperform the market when economic growth slows.
Companies of cyclical stocks sell discretionary goods and services many consumers buy when the economy is doing well, or hold off buying during slow times such as vacations. Non-cyclical companies sell goods such as “SIn Products” like vodka and weed.
Cannabis happens to be non-cyclincial stocks in two ways both medical and recreational. The fast-spreading Coronavirus has most businesses closed for weeks to come. Everything has a mandatory shut down except grocery stores, hospitals, pharmacies, and dispensaries. The need for medicine and a stress reliever is growing and cannabis companies could come out on top of the Coronavirus Crisis.
Non-cyclical stocks repeatedly outperform the market when economic growth slows. Non-cyclical securities are generally profitable regardless of economic trends although we have not seen that in the Cannabis Industry lately, more and more investors could be seeking to put their faith back into an emerging market that produces both medical and recreational solutions. Investing in non-cyclicals is a good way for investors to avoid losses when highly cyclical companies are suffering.