The psychedelic industry is booming. This medicinal, non-addictive drug has an array of medical benefits considering it’s only used in controlled environments with close observation.

So what are psychedelic stocks? It’s pretty much what it sounds like—stocks focused on the sale, distribution, and/or production of drugs that produce mind-altering effects.

Researchers have uncovered the therapeutic potential of psychedelic drugs to treat many conditions, such as Parkinson's disease, addiction, and depression.

With that said, here are five known stocks that hold the key to the future of the psychedelic market.

Mind Medicine (MNMD) is a major player in the psychedelic pharmaceutical industry. For the past few years, it has been growing faster than any other member in its peer group. It has an impressive list of collaborations and sponsorships that gives it a unique edge that other organizations in the space would love to have.

As a research-focused biopharmaceutical company based in the UK, its mission is to advance evidence-based treatments for various diseases associated with neuropsychiatric and neurological conditions.

The company has a unique business model, allowing it to function in a highly regulated market that shies away from less legitimate operations.

MindMed's clinical trials started in 2022, with phase 2b due later in the year. The company is also developing therapies for depression and ADHD, offering profit opportunities. There’s already increasing interest in MNMD with its share price rising 51.8% in 2023 after an 89% decline in 2022.

Atai Life Sciences is a clinical-stage biopharmaceutical company that discovers and develops novel therapies to address the pathophysiology of brain diseases, especially mental health disorders.

Their science stems from understanding the mechanisms of action of psychoactive drugs, and their pipeline addresses disorders in depression, anxiety, PTSD, OCD, schizophrenia, autism spectrum disorder, Alzheimer's disease, and addiction.

Atai was able to raise $258.8 million from stock sales after going public in 2021, which it can use to fund its research. Another thing to note is that it is backed by venture capitalist Peter Thiel which shows good prospects for the firm.

Even though Atai's depression drug PCN-101 R-ketamine failed a phase 2 trial, CEO Florian Brand is optimistic about future results. With a low share price, ATAI offers a promising entry into a lucrative market, earning a "strong-buy" rating according to TipRanks, with a $14 price target.

Cybin is a leader in delivering psychedelic drugs into the brain. Its proprietary drug-delivery technologies increase patient compliance, deliver precise doses, and give clinicians access to metabolic information at the point of care.

Cybin intends to build on its innovative therapies platform to develop a pipeline of novel psychedelic molecules for various mental health indications.

Its clinical trial for psilocybin in major depressive disorder and testing of their deuterated DMT compound for anxiety disorder both showed positive results. With a low market cap of $79 million, Wall Street rates CYBN stock as a "buy" with a $4.81 price target.

It’s one of the most well-known drug companies in the world, but Johnson & Johnson is also focusing much of its attention on psychedelic drugs.

That’s because it’s part of a group that is working with the FDA to develop an esketamine nasal spray for treatment-resistant depression. It is to be used with other antidepressants, and the company is working with different groups to make this happen.

J&J's stock is about 50% in the past 5 years and it pays dividends of 2.5%. In addition, its 2020 P&L reflected a revenue of $82.5 million which showcases its financial stability.

The company’s main focus is creating synthetic psilocybin to treat mental illness. Compass Pathways was the first psychedelic stock to go public on a major U.S. exchange and was listed at $17 in September 2020, which it reached quickly after its debut.

It received “breakthrough therapy” status from the FDA in 2018 for its drug COMP360, which is synthesized psilocybin designed to treat mental illnesses such as depression and anxiety.

Compass Pathways' stock declined by 35% in the past year, but with $143 million in cash reserves, they continue developing psilocybin therapy for mental health. Positive clinical trial results suggest potential success in treating treatment-resistant depression. Analysts on TipRanks rate CMPS as a "strong buy" with a target price of $31.50.

Psychedelic stocks are a niche group, to say the least. But as investors become more forward-thinking, these companies may begin to see increased interest in their products and services.

If you're able to stomach some volatility, this industry may be one in which you would like to invest. But remember—do everything in moderation.