Canada’s legalization of marijuana for recreational occurs October 17, 2018. That should boost marijuana production and sales—and the appeal of marijuana stocks for investors. However, even for aggressive investors, it’s important to understand the risks of investing in marijuana stocks.
The speculative appeal of Canadian marijuana stocks continues to attract investors looking for a “ground-floor opportunity.” However, the pioneers in an industry are not always the ones who survive.
There are also low barriers to entry for new competitors—and those barriers just got lower with the announcement by the federal government that it will let large cannabis producers start growing crops outdoors. That introduces a new, cheaper supply of marijuana that will compete with established indoor producers who have invested billions in greenhouses and other indoor facilities.
The government feels the new source of supply will help suppress the illegal black market for cannabis. Established indoor producers lobbied against outdoor growing, citing the risk of theft, contamination from pesticides from adjacent fields and the pungent smell of cannabis plants during flowering.
Longer term, if demand grows large and profitable enough, major agricultural and drug companies, as well as tobacco firms, are likely to enter the field and take sales away from existing growers.
Shares of many marijuana stocks may move higher as momentum traders buy the widely followed stocks on the latest upswing. However considering their current sales, many Canadian producers have very high “market caps” (the value of all shares outstanding). That means they need huge revenue growth even to justify their current stock prices. If revenues merely hold steady or rise only slowly, their stock prices will be vulnerable.
Note, too, that strong investor interest in any new area also attracts penny stock spammers—and marijuana stocks are no exception. The upcoming market boom following legalization could bring about a new wave of these penny promotions.
Our special report gives you analysis of Canada’s leading marijuana stocks today—as well as ways to profit from the marijuana boom that are very different from what many investors are thinking. Read our special free report, The Highs and Lows of Marijuana Stocks.
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There hasn’t been any letup in cannabis articles a month into legalization. As always, we sift through all the stories and select those that are most likely to impact you, as a Canadian investor.
1. The ouster of U.S. Attorney General Jeff Sessions… Read More
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Three weeks after legalization, news on cannabis and cannabis stocks continues to mount. We carefully filter all of the stories and select the ones that should mean the most to you as a Canadian investor.
1. A growing number of medical cannabis users say… Read More
This stock recently bought a leading drugstore company with operations in several provinces. But unlike its main rival, Shoppers Drug Mart, the company’s pharmacy chain is taking a wait-and-see approach to cannabis sales. That’s largely because the provincial government in its biggest… Read More
The HORIZONS MARIJUANA LIFE SCIENCES ETF (Toronto symbol HMMJ) invests in North American firms that are legally involved in the cannabis industry. Canadian companies—including Aurora Cannabis (12.1% of assets) and Canopy Growth (11.0%)—make up 80% of the portfolio. As such the fund’s performance—specifically, its Daily… Read More
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Two weeks after legalization, news on cannabis and cannabis stocks continues to mount. We carefully filter all of the stories and select the ones that should mean the most to you as a Canadian investor.
1. Ontario’s ombudsman is now fielding a growing… Read More
This alcohol beverage giant wants to sell some of its smaller brands, but it may also be interested in partnering with a marijuana producer to develop a cannabis-infused drink. Recent speculation about who that partner will be has fuelled gains for several… Read More
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A week after legalization, news on cannabis and cannabis stocks continues to mount up. We carefully filter all of the stories and select the ones that should mean the most to you as a Canadian investor.
1. Desjardins Group—Canada’s largest federation of credit… Read More
Health Canada recently awarded this chain of drugstores a licence to produce medical cannabis. While the business doesn’t plan to grow the plant itself, that licence is a key step in its quest to distribute medical cannabis through its pharmacies. Completing the… Read More
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Recreational cannabis is now legal and news only continues to gain traction! We filter through the volume of stories for five articles with direct or indirect impact on investors.
1. Canadians remain divided in their approval of cannabis, according to a new… Read More
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