Ladies and gentlemen, in case you’re not paying attention, marijuana stocks are smokin’ hot right now.
In fact, they’ve been scorching hot for the past 6 to 8 months. There have been three major catalysts that can explain the insane gains many of these stocks have made.
Catalyst number 1: Marijuana is now legal for medicinal and recreational use in our sister country, Canada.
Catalyst number 2: Marijuana is now legal for medicinal and recreational use in the state of California.
Catalyst number 3: Constellation Brands (NYSE:STZ), which is the company behind Corona and Modelo beers and Svedka imported vodka, has purchased a minority stake in a Canadian marijuana company called Canopy Growth.
One of the fastest growing markets in the world is the legal weed market. It’s not something you’ll see the financial media talk about in great length because although it may be legal in 29 states in some form, it’s still not legal at the federal level. That has not stopped investors from buying shares in these companies like they’re going out of style. Check out some of these moves over the last 30 days:
Canopy Growth Corporation (TWMJF): up 79%
Aurora Cannabis Inc (ACBFF): up 90%
Cannabis Sativa, Inc (CBDS): up 87%
INSYS Therapeutics Inc (INSY): up 136%
Aphria Inc (APHQF): up 101%
MedReleaf Corp (MEDFF): up over 40%
Let me remind you that any stock with these gains in one year would be great. These are the percentages each stock has been up in the last 30 days. That’s absolutely insane. Not quite bitcoin-like, but close, as far as stocks are concerned. And if you’re a regular Wealthy Joe reader, you know that stocks are SAFER!
Should you put your money to work and buy some marijuana stocks? It’s a very tough call for a number of reasons:
- Every last one of these stocks is grossly overvalued. They are trading at multiples that are way out of whack. However, that’s quite normal when an industry is in the very early growth stages. Many investors pile in early in anticipation of growth down the road.
- Even though marijuana is legal in 29 states, it’s still illegal at the federal level.
- We don’t know for sure who the winners will be.
Can you take a flier (investment-speak for “take a risk”) on one or two of these companies? As long as you are willing to deal with significant volatility and hold on to your shares for at least 7 to 10 years, if not longer, it may very well turn out to be a great investment. Just remember that an investment in any one of these companies comes with tremendous risk.
I’m not making any recommendations. I just want all of my Janes and Joes to know what’s happening in the marketplace. Until next time!