Marijuana Investments Aren’t Quick Hits
Last year, it was hard not to get into the hype surrounding marijuana stocks. Some of these shares were rising in value by hundreds—even thousands—of percentage points within a year. The beginning of the rush was the best time to play the short game in marijuana stocks.
Which is to say, that time has passed for marijuana investments. Now, investors in pot stocks need to be willing to stick it out for the long haul if they want to see good returns.
The Marijuana Bubble
We recently witnessed a big dip in the marijuana stock market, as a ton of weed shares took hits, some as high as 30%. Those shares have since recovered, but have yet to regain the highs of early 2017.
What does that mean for marijuana investments? Is now the time to cut and run? I don’t believe so.
The fact is that marijuana stocks, as witnessed by their steady (if slow) recovery, are on the mend. You don’t want to be jumping ship at the nadir of the stock’s value. There’s a good chance that marijuana stocks will not only recover, but will carry on with solid gains.
But here’s what anyone looking to get into marijuana stocks needs to understand: We’re probably not going to see the 2016 gains repeated. That rush has passed. Now you have to treat these stocks as long-term investments with the ability to bring in strong, solid returns for years. Those returns won’t be as flashy as thousands of percentage points a year, but they will be more sustainable.
So, what we need now is a change of expectations and a change of philosophy when looking at marijuana stocks, but that doesn’t mean you should sour on pot investments.
The New Pot Stock Play
Pot stocks were once both a great short-term and long-term investment, but the reality has shifted and so should your investment strategy.
Any new marijuana investments need to be focused on the companies themselves. Previously, you could make money just on the industry momentum and growing excitement, which drove that massive increase in stock values in 2016.
Now you need to put in more legwork and, like every investment you make, you should know what a company actually does—and believe in that company’s ability to deliver financial success—before putting your money in. Playing the market will never be a sure thing, but you can better your odds significantly with some research and insight into the companies you’re buying into.
The marijuana stock market is going to have a bunch of companies that were created in order to take advantage of the investment rush, and that means you’re going to have a lot of hollow companies. The key is to sift out those duds and identify companies that not only are growing on the stock market, but that also prove to you that their business model is sound and that their company is one that can genuinely deliver on its promises.
With that in mind, your marijuana investments can no longer be premised simply on a company being a marijuana company. Instead, your investment decisions need focus on what the businesses do that set them apart from others.