Topic: How To Invest

What is Pat’s commentary for the week of July 17, 2018

Article Excerpt

Canada’s legalization of marijuana for recreational use is now set for October 17, 2018. That should boost cannabis production and sales—and the appeal of marijuana stocks for investors. However, even for aggressive investors, it’s important to understand the risks associated with these stocks. Share prices for many Canadian cannabis stocks have soared since mid-2016—although most have now given back some of those gains. 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. Longer term, following full legalization, major agricultural and tobacco firms are likely to enter the field. They would 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 and earnings, many Canadian producers have very high “market caps” (the value of…

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