Cannabis Stocks — Buy or Sell?
Last week White House spokesman Sean Spicer stated that recreational marijuana will see greater enforcement from the federal level.
This comes after many US states have passed legislation to legalize recreational marijuana.
California, the sixth largest economy in the world, overwhelmingly voted to legalize the plant following the lead by Colorado two years earlier, which saw more tax revenue from cannabis last year than they did from alcohol.
However, that does not change the fact that recreational marijuana consumption is still illegal on a federal level.
“There’s a big difference between (medical marijuana) and recreational marijuana, and I think when you see something like the opioid addiction crisis blossoming in so many states around this country, the last thing we should be doing is encouraging people,” Spicer said, giving the first glimpse of the new administration’s views of the growing legal cannabis industry. “There is still a federal law that we need to abide by in terms of recreational marijuana and other drugs of that nature.”
The great marijuana debate could be argued about for days. Is it right? Is it wrong? Is it worse than alcohol? Is it a gateway drug?
Personally, I don’t believe there are 100% correct answers for any of those questions. It’s all up to personal opinion and a variety of conflicting scientific studies.
“Though Spicer drew a connection between opioid use and marijuana, there is no known connection between the two. According to the Centers for Disease Control, in 2015 more than 33,000 people died from opioid overdoses, which includes both heroin and prescription painkillers, “more than any year on record.”
The CDC reported that “nearly half of all opioid overdose deaths involve a prescription opioid.”
Marijuana overdoses account for no deaths, according to the Drug Enforcement Administration. In fact, a study reported in “Time” in 2016, said that “when states legalized medical marijuana, prescriptions dropped significantly for painkillers.”
All of that said, we are looking into this entire topic from an investing standpoint.
Spicer’s comments last week sent many marijuana stocks plummeting, as investors became wary about the future of cannabis companies in the US.
My two original recommendations, $MJNA and $KSHB, are down significantly from recent highs. However, they are still way up since I first recommended them.
So… what should you do?
If you are already invested in these stocks
You obviously have two choices: sell or hold tight.
If you’d like to play it safe, you can sell and bank your gains.
But remember, this was a speculative investment to begin with, so major fluctuations like this shouldn’t surprise you.
It’s a bit crazy that a single comment by a government official can cause the selloff of billions of dollars in the publicly traded cannabis space. In theory, the opposite circumstance could occur as well.
A single positive comment, such as the federal government specifically stating that they will not interfere with states that have voted for legal recreational marijuana consumption, could send stocks soaring.
Again, it’s a speculative investment.
If you have not invested in these stocks
Many cannabis stocks — particularly Canadian stocks — have actually seen a huge boost from Spicer’s comments.
Some investors are seeing this dip as a buying opportunity and others are taking their money and putting it into the Canadian market.
These emotional trades prove how volatile this cannabis market is.
Truthfully, I believe the huge early gains have already been made. Yes, there may be much more upside to come, but those who bought last year (or earlier) may have seen the biggest jumps.
Be patient here. I don’t think the marijuana market has dipped enough to justify increasing a speculative position.
If cannabis stocks drop much lower, that time may come.