Not Going Too Long on MedReleaf Marijuana Stock
The marijuana stock market is a wild, wild place to be right now. Companies are rising and falling at extraordinary rates, making rich winners and poor losers by the day. The potential for the industry is there; nobody denies that. Instead, doubters fear that unbridled hype will ultimately sink marijuana investments while others believe that marijuana stocks are a solid investment.
I’m not here to necessarily weigh in on that discussion. Instead, I’ll stick with my theme the past few weeks, examining how to play the marijuana market, if you do decide to invest.
There is a great variety of companies that you could choose to invest in, each with their own strengths and weaknesses, but I’m more interested about which stocks I see as a long-term investment versus which ones can be played for short-term gains.
Marijuana IPOs: Short-Term or Long?
When it comes to the marijuana stock market, there’s a bevy of options that you can choose from, including initial public offerings (IPOs). Do you go for the younger upstart companies with huge growth potential? Or do you go for more known commodities that have passed through the surge, and instead are now in more stable growth patterns? Both have their positives and negatives, and in the end it comes down to investor disposition.
But what about marijuana IPOs? What’s the best way to look at these companies?
In my last piece about MedReleaf Corp (TSE:LEAF), I examined its explosion, when it gained 25% in stock value in its first few weeks on the market. But, as I also mentioned in that article, the hype around marijuana stocks is going to create a boom-and-bust cycle within the industry. As such, you need to be aware of which stocks are longer holds, and which ones can be acquired and flipped for shorter plays.
LEAF stock has gone down five percent in a single day, and that goes to show you how fickle these marijuana IPOs can be and why they are probably best suited to be moved on a speedy basis.
Ultimately, especially in the tumultuous early goings, an IPO is best served as a quicker return-generating stock. But here’s the catch: every so often, a company will come along that will not only generate fast growth, but also be a solid pick down the line. How do you identify said company? It all starts with research.
If you look into a company and are convinced that it has a competitive advantage over rival marijuana companies, then you’ve suddenly transformed your pick-and-ditch marijuana IPO into a solid marijuana stock worth owning down the line. The key is investigation and confidence in the ticker you choose.
The hype machine behind marijuana is unlikely to slow anytime soon, so the true valuations of these companies are hard to peg. At the end of the day, as with all investments that are made on a long-term basis, you want to believe in the company you’re investing in, believe in its management, and believe in its product.
When all those criteria are satisfied, then chances are you have a winning ticker on your hands.