Thinking of entering the Cannabis Craze?
Cannabis stocks took a slight hit this week amid many companies facing lawsuits, SEC warnings, and the United States attempt to put a lifetime ban on Canadians who either work for marijuana related facilities or use it. On the contrary, a recent U.S. projection shows that the cannabis industry could reach 22 Billion by 2022. So does this entail jumping on the opportunity of this dip?While investing in marijuana stocks is completely contingent upon an individual's risk tolerance and investment style in general, even for the short term, there are several factors to consider before buying a few speculative names.
The Cannabis Bubble has happened before
The current valuation of the cannabis market is similar to the high valuation of pot stocks in 2014. For example despite companies such as OrganiGram or Notis Global Inc. not being able to make a profit in their business were doing amazing in the markets. This irrational exuberance only seemed to increase within the summer of 2014 where pot stocks such as Tweed Inc. were valued as a 100-million dollar company before it even made a single shipment. In fact, if you hopped on to NGBL during the 2014 cannabis bubble at 25.00 each stock would be reduced to .02 cents today. A 10,000 dollar investment at this entry point would only amount to about eight dollars today.
The Case against investing in Cannabis related stocks
**GOVERNMENT REGULATION. **
Despite Canada announcing that pot will be legalized on October 17th of this fall, there is still a lot of backlash against this legalization; particularly in the United States. The federal government is already computing a method to prevent the expansion of marijuana factories in the U.S. Current republican leaders such as Jeff Sessions has been a long time opponent of the legalization of marijuana.
Potential Profits
Why do speculative stocks and bubbles exist in the first place? For the potential profit. As mentioned before, depending on one's investing style there is nothing wrong with entering such a booming industry for short profits. Though these are not stocks suggested to save your retirement with, there is no dispute the fuel to the possibility of growth alone is a reason to consider investing in these stocks.
** So what are your thoughts? Anyone made any money in the recent pot craze? **
I personally bought into Tilray when it was around 27 dollars and sold at 60. I never imagined it going this high but I'm off the bandwagon now and just enjoying the show.
It’s too late to invest in weed stocks. This point in the move is a trade.
I wish the sec would get rid of the high borrow rates. It’s why stocks like these can go up 500% this quick.
If a guys short from 60 and the borrow rate is 100% then if it trades 240 for 3 months he’s short from 0. It’s why things like this can get mega manipulated because no one can short or those short are exposed to mark to market as real financial loss. It’s not just a price move.
Hedge funds could fight a move like this. Like a big long short could short these things. If you are a 10 billion fund you could go short to help the market balance short term. But the borrow rates kill the ability to do that trade making mark to market losses into real losses.
Same thing happened with bitcoin stocks 8 months stocks. Riot blockchain went to 40. Completely obvious fundamental short. But if the borrow rate is 100-200% you can’t play. Those rules turn things like these into pure trading vehicles,
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