Investing in marijuana stocks: Is the ‘high’ worth the risk?

Special Reports

 Recreational marijuana is legal in 10 states and the drug is approved for medicinal purposes in 33.

The 2018 Farm Bill removed industrial hemp from the Controlled Substances Act, making it a legal to grow, and making a way for more production of CBD products.

As acceptance grows, so does the business and that’s creating a competitive market on Wall Street.

The future of the industry is uncertain and the product controversial but people are still betting the high is worth the risk.

“I can tell you, there are positions that folks have tripled their value, quadrupled their value with some of the cannabis companies we have bought on the stock market,” said Chris Stout, Wealth Manager, FS Wealth Sports and Entertainment, LLC. 

He added, “They’ve also lost in some of the positions 70, 80, 90 percent.”

There have been gains and losses for Chris Stout’s clients who took a chance on cannabis companies.

Stout is a Wealth Manager and Co-Founder of FS Wealth Sports and Entertainment. He says he started looking into the marijuana market a few years ago and moved in, “very slowly.”

With more than a decade of experience studying stocks, he is confident saying, “the valuations aren’t real.”

“They’re on Mars frankly, they’re not legitimate valuations.”

Stout says valuations in the marijuana market might be way off, “however the reason they are so high is because there is a lot of anticipation that business is going to double, triple, quadruple over the next several months, if not a year-or-two.”

He added, “That’s a very attractive proposition to investors.”

The newness and anticipation is appealing to investors hoping to get in low and watch their profits soar. That’s what happened, at first, with Tilray, a Canadian company that in-part supplies cannabis to pharmaceutical distributors.

It opened in July 2018 at $17 a share and peaked 2 months later at $300 per-share

READ: Canadian marijuana company Tilray has first US pot IPO      

Just as quickly as it shot up, it dropped, and is now leveling around $75 per-share.

Gains and losses define the stock market, which is why Stout says it’s best to invest cautiously, especially when considering an unstable stock.

“Classify it if you’re going to do this, what it would be like going to Vegas because you’ve got a chance to make a lot of money, no question.  But you have a chance of losing a lot of money in a hurry.”

He added, “If you don’t have an advisor, I would be extraordinarily careful in the amount of money that you put in [on a marijuana stock.] I would call it ‘fun money’ if you will, money you don’t mind losing.”

With the ‘fun money,’ add “patience, patience, patience.”

“Long-term investing with patience is of utmost importance whether it’s a cannabis company or whether it’s a technology company whether it’s an industrial company, stay patient.”

Investment firm, Cowen, estimates the cannabis market could be an $80 billion industry by 2030.


READ: Marijuana: A $75 Billion Market by 2030?

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