4
votes
Thoughts about investing in Weed stocks?
Link information
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- Title
- Aurora Cannabis, Canopy Growth, or Tilray: Which Stock Will Be the Amazon of the Marijuana Boom? -- The Motley Fool
- Authors
- Keith Speights
- Published
- Mar 10 2019
- Word count
- 1137 words
Investing in anything is about making an educated risk/reward trade off decision. Getting in on bubbles usually doesn't qualify as investing. For every bitcoin, there's a hundred shitcoins. For every successful tech IPO, there are thousands of failed startups.
I don't know anything about the business of the weed industry, and from the phrasing of your question, I reckon you don't either. If you don't know anything about the industry that the market doesn't already know, then putting a bunch of money in certain stocks in basically gambling. Not to say that gambling is bad, but just be sure that you don't NEED that money. You can't expect to get rich from any one play.
What stocks are you thinking about investing in? How do those companies make money, how will they grow their revenue? What kind of laborers will they need to scale, and do people with that specialization exist in the current labor market? Are they reliant on any one supplier or any one buyer for the bulk of their business? It's all the same questions you'd ask about any investment. IMO, a good exercise would be to dig into a weed stock that interests you, and read their SEC filings. Really understand the business and then invest if you think they are a good company. That way you learn a valuable skill whether or not the stock ends up making money.
I missed the boat with the bitcoin boom and the FB IPO...Anyone messing around with Weed Stocks? Any advice? Thinking about dipping my toes in the water.
For what purpose? To get rich quick? Or to make a stable income? It really depends on your goals in life too. Do you want money to be readily accessible, or do you not mind it being locked away for a while?
If you're just looking to complement your earnings and become a bit better off later in life, the answer is almost certainly never going to be individual stocks. Managing stocks can effectively be a full time job (it is, for some), and unless you do an extreme amount of research into a particular company and understand their ideals, target market, and potential for growth, you're basically throwing coins into a wishing well.
I'm nearing $10,000 net returns annually on my investments. And I don't look at a thing. How do I do this? I pick a few good, respected index funds & investment funds with low fees that cover a wide portion of the market. Macroeconomically, given enough time, I am guaranteed to be better off. Some years I've averaged 12%+ return, while in others over the last few months, I'm down about 2-3 points. But at least I haven't turned 5-6 digits of savings into 2-3.
But if you're looking for a wild ride, or really have a company you believe in, by all means, drop your eggs in that one basket :).
Oh this would be a moonshot type deal where I'd be using money that I wouldn't be all that worse off without. Say one or two thousand working it's way up to $5-10K invested overall over the course of several years.
This would in no way be a retirement strategy or anything like that.
Penny Stocks is one of my hobbies; I like to take ten bucks and see what I can do in a month. Because I'm playing with such a small amount it almost never takes off, but sometimes I can make up to 30 or 40 dollars. That's what recently happened with me and weed stocks. I invested in NBEV back when it was around a dollar or so and that really helped. What matters is just keeping your ear to the ground for new inventions or trends before they occur.
Fascinating. That sounds like it could be fun. What exchange do you use? Robinhood is one I've heard a lot about - but it sounds like you can get in trouble fast if you're not careful.
Just Robinhood. Recently made a Binance account so I'll probably get back onto some crypto.
Probably dodged a bullet with crypto since the boom was so short and quick you would most likely end up losing money.
FB was considered a risky stock by many and the IPO price seemed high. IIRC it dipped quickly and took a year to reach the IPO price again. After that it soured until last year. The point is, there was a whole year for someone who bought at IPO to chicken out, sell low and lose a huge opportunity.
Lyft will IPO this month I believe. Some people doubt it and some think it will be great. If you're looking for IPO stocks in hopes of getting massive gains in the next 3-4 years there are tons of options, but of course no one knows if they would sour. Just as no one did for FB.
As for weed stocks, they fluctuate a lot and I find them a bit risky since it's hard to choose the right one. They had a bitcoin-esque surge and dump about 6 month ago, which makes me more skeptical of them. There definitely is an opportunity with them, but I feel they are very unpredictable. Imo, you will likely need to be ahead of the news to be able to ride the waves with them otherwise you'll be too late.
I hadn't really considered an active approach - that's very interesting but it ultimately probably more active than I'd like.
My thought was to buy 5-10 of the biggest ones at the moment and hold on to them for +5 years or so. Another approach may be to buy a mutual fund or wide array of individual stocks. I guess what I'm trying to express is I'm interested in riding what I see as the inevitable market boom that is surely coming rather than to actively trade individual winners and losers.
Maybe a mutual fund would be a better option. In general, I'm not very bullish on the weed market for the near future, but I am by no means an expert. Just looking at their trend over the last year or so for most of the big ones will show how risky they are. My non-expert experience with hype in investing tells me that it's too late to cash-in on any "hype-gains". I think from now on it will mainly rely on performance, which will probably mean slow growth unless the weed companies announce some unimaginably high earnings in the next few quarters.
Canopy Growth Corporation has a $16 billion dollar market capitalization. They are pulling in about $155 million, and spending about $600 million.
Even at their current growth rate of 200%, it's going to take 4-10 years for them to pull in enough revenue to justify a $16 billion dollar market cap.
They would need to become the Phillip Morrison/ Johnson & Johnson of weed in order for you to see a 10x-30x return on your investment.
Also, be warned, at these nose bleed valuations, the weed companies are going to crash hard in the next recession (whenever that occurs.)
From what I've read and listened too, the low hanging fruit in the cannibis industry has already been picked clean. The good time to get in was about a year to two years ago.
The whole market is riskier now and you really need to do your due diligence on investigating companies, in what is already a complex legal and commercial environment.
If you still want to get into it, I would start following channels on youtube and twitter by established stock market traders and analysts that predominately trade in areas outside cannibis, but speculate in that industry. Weed stock forums can be an echo chamber. I'd personally recommend The Chart Guys channel on youtube.
Yeah, this would be akin to gambling and would be done with money that wouldn't hurt too much to lose. So this wouldn't be a retirement strategy or anything like that.
Thanks for giving me some things to think about.