Marijuana Investments: What the Billionaires Think
One of the best ways to know if an industry is on solid footing is to watch for big-name investors getting involved. When highly respected investing icons begin pouring money into an industry, it’s almost universally a good sign. So what do the top billionaire investors think about marijuana investments? Is there such a thing as a “Warren Buffett marijuana stock?”
The short answer is, well, no. But the longer answer is more complicated and more interesting.
Warren Buffett investments are typically tied to long-term, stable businesses that will show steady growth over many years. It’s a strong model that has served the “Oracle of Omaha” well over his illustrious career in the stock market.
This strategy does not, however, align with the marijuana industry. Yet.
Right now, there’s simply too much volatility for marijuana investments to qualify as a target for investment by Buffett and other like-minded individuals.
But the thing is, this doesn’t necessarily reflect all that poorly on the marijuana market.
Sure, it would be great for a billionaire investor with a huge name and strong following to put his money into the industry, but a marijuana market that Warren Buffett would want to invest in would be one that would forgo all the things that make it so special right now. Which is to say, the volatility.
Investors are ecstatic if they can find solid, continuous, double-digit growth year-over-year. That’s a very strong portfolio. But the marijuana market does not play by that standard. We’ve seen triple-digit growth in months. We’ve also seen massive declines in just as short a time.
The opportunity to make exponential returns on your investment comes at a price, to be sure, but it’s one that marijuana bulls are usually willing to risk. After all, so few industries provide the type of growth that marijuana investors have experienced over the past few years.
Marijuana stocks preferred by Buffett and his ilk would not be riding these wild highs and lows. And that’s fine. It’s simply an investing philosophy of a different sort. Not better or worse, just different.
So the short answer is no, so-called Warren Buffett marijuana stocks do not yet exist, and they may never come into being. But that has more to do with the nature of the industry and its position as an emerging market than any sort of condemnation of the marijuana market by Buffett.
Billionaires List Invested in Marijuana Stocks
One noted billionaire investor, however, is playing a big role in the marijuana industry, just not in the way you’d think.
George Soros may not have any publicly disclosed positions in marijuana stocks, but the man put a lot of money into ensuring that marijuana would be legalized in California. (Source: “Billionaire activists like Sean Parker and George Soros are fueling the campaign to legalize pot,” Los Angeles Times, November 2, 2016.)
Proposition 64 was passed at the same time as the presidential election in November 2016. The law essentially legalized cannabis use and sale for adults in the state of California. This was a huge victory for the industry as the richest and most populous state opened itself up to the green tide.
Naturally, this was a boon to marijuana investments as the bill became law in January 2018.
So where does Soros factor in? The influential billionaire was part of the team that pushed for the bill to pass into law, helping raise nearly $16.0 million for their cause. That amounted to roughly four times the amount of money spent when the bill was first proposed in 2010.
“Our marijuana laws are clearly doing more harm than good,” Soros wrote in an op-ed for The Wall Street Journal in 2010, the last time California considered legalization. (Source: “Why I Support Legal Marijuana,” The Wall Street Journal, October 26, 2010.)
Whether Soros has invested in marijuana stocks is irrelevant; he has already played a massive part in the future of the marijuana industry, due to his efforts in California.
Why Choose Marijuana Stocks?
In order to understand why billionaires aren’t exactly rushing in droves to make marijuana investments, let’s take a look at what makes the marijuana market so enticing in the first place: growth.
The market loves growth and rewards companies and industries that are likely to expand in the future. It’s why investors will throw money at companies operating at a deficit. The implication is that one day they will be making tons of money, which will justify those early burn years.
Marijuana stocks are at the start of their lifespan. The industry is relatively young, with most of the legalization of medical marijuana coming within the past two decades and legalization of recreational marijuana only now coming into effect.
As such, this is a very exciting industry, but one that is going to be volatile. There are going to be growing pains, corrections, and wild swings, all of which are not what high-money investors typically enjoy.
Think about it. If you have a billion dollars to invest, would you rather put that somewhere safe, where you’re far more likely to make a hundred million dollars by year’s end, or would you risk losing a good chunk of that money in an attempt to make closer to five times that amount?
It just stands to reason that, once you start playing with numbers that high, you’d rather be safe than sorry.
But for smaller investors who don’t have billions of dollars sitting in the bank, there’s far more incentive to accept those big swings with volatile stocks.
Which brings us to why so many people are attracted to marijuana investments. Of course, it doesn’t hurt that marijuana is inherently an interesting product, due to its past as an illicit substance—not to mention the place it occupies in the social consciousness in a way that a commodity like steel simply does not.
The buzz draws in more investors and only makes the market more volatile. But for smart, heady marijuana stock market players, there’s a lot of money to be made, even if billionaires may stay out for a while.
The bottom line is that billionaires are playing a huge role in the marijuana industry, even if they haven’t made any marijuana investments public.
Soros especially played a big part in the push for California’s marijuana legalization, having advocated for it for years. The power of his voice, coupled with a solid injection of cash into the campaign for legalization, makes him one of the more influential people when it comes to recent marijuana stock price movement, even if he didn’t invest a penny.
Other billionaires and renowned investors are certain to become involved in the marijuana sector, especially as time goes on and the industry sits on more solid ground.
For many big-name investors, there’s simply too much in the air right now when it comes to marijuana investments. And that’s okay. They often look for long-term gains that aren’t prone to wild swings. But for smaller investors who are looking to swing for the fences and tolerate volatility along the way, marijuana stocks make a lot of sense.
So don’t worry if Buffett isn’t all-in on marijuana stocks; that doesn’t mean they aren’t good investments.