FREE NEWSLETTER: Econintersect sends a nightly newsletter highlighting news events of the day, and providing a summary of new articles posted on the website. Econintersect will not sell or pass your email address to others per our privacy policy. You can cancel this subscription at any time by selecting the unsubscribing link in the footer of each email.

posted on 13 January 2018

Should You Buy Into The Marijuana High?

by Investing Daily, Investing Daily

-- this post authored by Scott Chan

Investing Daily Article of the Week

In the first two trading days of 2018, few stocks lit up the boards more than marijuana-related stocks. Investors rushed to buy shares in reaction to the sales launch of legal pot in California.

Please share this article - Go to very top of page, right hand side, for social media buttons.

California is not the first state to legalize marijuana, but it’s the biggest in terms of population. In other words, the new law opened up the largest market in the U.S. to pot. Demand is so strong that users reportedly formed long lines around the block to get their stash.

Major Economic Impact

According to a research firm legalization of pot in California could directly create almost 100,000 jobs in the state. U.S. sales of legal pot could pass $20 billion per year by 2021. Overall economic impact could be $40 billion by that time.

As you can see in the map, green states are still in the minority. Bulls hope that many more states will turn green in the years ahead. After all, public acceptance of pot legalization is growing.

Before getting caught up by the hype, however, it’s important to remember that marijuana is still illegal on the federal level.

Washington Flashes Yellow Light

Indeed, on Thursday the U.S. Attorney General threw cold water on the rally. He rescinded a policy that says the federal government would leave states alone in regards to marijuana as long as they followed a set of rules. In essence, he signaled that the federal government could come after you even if marijuana is legal in your state.

In reality, the federal government would only go after the biggest fishes in the sea, so the overall marijuana industry’s growth should not be much affected. However, the hint that Washington could interfere was enough to cause a big drop in the same marijuana-related stocks.

After all the noise dies down, the marijuana industry should still experience solid growth. Investors just have to be careful not get too carried away and separate hype from quality.

Not an easy Choice

Hundreds, if not thousands, of startup companies will try to catch the legalization wave, but most will probably fail. Because marijuana is still illegal on the federal level, marijuana companies have little access to even basic banking services, which makes it difficult to run a public company. Rather, it is safer to bet on the established public companies that are able to shift focus to pot.

So what if you want to make some money in marijuana stocks? What should you buy? The answer may not be so clear.

Investors have different choices. For example, you could pick a tobacco company that could make cannabis cigarettes, or you could invest in a company that could develop medicine based on marijuana, or maybe even fertilizer that could help pot grow.

The landscape is still so in flux that it would be hard to bet on specific companies. The better choice may be bet on the whole industry.

One Size Fits All

This can be done through an ETF, such as the ETFMG Alternative Harvest ETF (NYSE: MJX). The fund invests in companies in different marijuana-related areas and even has many Canadian stocks.

Canada legalized medicinal use of pot in 2001, and it could legalize recreational use soon. This would make Canada an even better place to invest in marijuana.

When it comes to investing in marijuana, investors should tread carefully. There’s money to be made but the risks are also high. When it’s hard to pick one of two winners, it may make sense to bet on a group instead.

>>>>> Scroll down to view and make comments <<<<<<

Click here for Historical Investing Post Listing

Make a Comment

Econintersect wants your comments, data and opinion on the articles posted. You can also comment using Facebook directly using he comment block below.

Econintersect Investing

Print this page or create a PDF file of this page
Print Friendly and PDF

The growing use of ad blocking software is creating a shortfall in covering our fixed expenses. Please consider a donation to Econintersect to allow continuing output of quality and balanced financial and economic news and analysis.

Keep up with economic news using our dynamic economic newspapers with the largest international coverage on the internet
Asia / Pacific
Middle East / Africa
USA Government



Analysis Blog
News Blog
Investing Blog
Opinion Blog
Precious Metals Blog
Markets Blog
Video of the Day


Asia / Pacific
Middle East / Africa
USA Government

RSS Feeds / Social Media

Combined Econintersect Feed

Free Newsletter

Marketplace - Books & More

Economic Forecast

Content Contribution



  Top Economics Site Contributor TalkMarkets Contributor Finance Blogs Free PageRank Checker Active Search Results Google+

This Web Page by Steven Hansen ---- Copyright 2010 - 2018 Econintersect LLC - all rights reserved