Don’t Believe The Hype. If You Have Never Invested Before, Buy Cannabis Stocks Now.
Why The News This Week Hasn’t Dissuaded Long-Term Marijuana Investors
Alright, so stocks tumbled after a sudden rush of Reddit investors flooded the market with record gains, just to sell out and it dropped right back down a week later. What else is new? However, this isn’t the end for cannabis stock, it just may be the best time to buy in.
While incredible fluctuations and major attention are a result of online forums turning the market on its head, it’s left many who have never dealt with the stock market before now interested in investing for the first time. They want to see what all the fuss is about, and who can blame them?
The problem is, most of us don’t know what we’re doing. The average person doesn’t have the time or expertise to actually know what they’re talking about when brokers and financial strategists discuss which leads and funds are worth it, but I’m here to say you don’t have to, and you can ignore the daily news hype.
The difference between Gamestop and marijuana (besides the obvious) is that the cannabis industry is already set for long-term gains. Support for legalization has been growing rapidly across the country, and the way state policies are going, investors are arguing the market is still set to rise. President Joe Biden and Vice President Kamala Harris have both joined the support of reforming the U.S.’s federal marijuana laws, and with South Dakota still set to open its doors despite a judge’s overturn of voter-passed legislation, industry growth and profitability are set to rise.
There’s also plenty of potential benefits to invest now when everything is just, ahem, budding. Michigan was the latest to fully legalize marijuana in 2019, and their market is set to reach $3 billion in the next three years. If you’re wanting to invest, plenty of viable companies and funds that are bound to grow exponentially in this state, as well as Oregon and New Jersey as they continue to grow their markets.
Why We Shouldn’t Freak Out
I know what you’re thinking. If you’ve been keeping up with what’s been going on you’ll know this staggering inflation of stock prices and subsequent tumble could be bad news. Many investors are citing Tilray’s major decline in 2018 and calling this another Gamestop moment, but it’s also an example of the trend to an attempt to short-squeeze another sinking stock and it affecting the market in waves.
Others who had been paying attention to the cannabis market way before the Reddit fiascos are holding on to the idea that this is only the beginning for a potential multi-billion dollar national industry, and it’s best to get in now while prices are low and wait out the hype. If we look back further than the past few weeks, many stocks projected to rise back in 2019 have carried on to receive all time gains just in the past year. In short, this thing may have crashed, but it hasn’t burned.
For example, if you’ve seen cannabis stocks drop because of Reddit and Twitter feeds, we can still see those same stock values are only losing about as much progress they’ve gained in the past few weeks, and are set to climb right back again, if at a normal rate this time.
Take Aphria, a medical cannabis producer, for example. While their stocks weren’t immune to Reddit investors’ shenanigans as Aphria stock soared and then dropped this week, looking at their trends over just the past few months we can see they still have a long way to go before they hit bottom, with industry experts expecting it to grow again despite this internet-fueled fluke. The same is to be said about Horizons ETF, Sundial Growers Inc. (SNDL), and Canopy (CGC), as well as many mutual funds comprising of marijuana companies, all cannabis producers whose stocks have risen, and fallen, but have dropped nowhere near the rates they had three to six months ago. This may work out in people’s favors after all.
Now, I’m talking a lot of projections, but many investors who have made real money say that professional market analysts really can’t predict any better than the average person, and it’s proven too. What I mean by projecting is looking at a company’s past performance yourself over the past 3 to 6 months at least, a year or more if you can, and make a judgement call on where that company will go in the future alongside the industry it’s in.
This is not a sponsorship by any means, but I personally recommend the Public app for casual investors. It’s the most user-friendly stock app I’ve found, and it offers fractional investing (buying a more affordable piece of expensive stock from larger companies), market news, and the ability to read posts from other individual investors on what they’re doing built right in. The fact it doesn’t have any scandals in the past and has policies that protect people from the alleged market manipulation we saw with other Reddit stocks (ahem, Robinhood, WeBull, looking at you) is another bonus.
I know, it’s scary for first-timers, but this isn’t a get-rich-quick scheme. Trust your intuition, you have all the information at your fingertips.
Which brings us to:
Why Reddit Shouldn’t Scare You From Investing in Cannabis
For those new to the game, the basic principle of the stock market is that the more stocks people buy, and the longer they hold onto them, the more profitable that stock becomes. However, in light of the news we’ve seen the past month, to begin investing there are some things to know:
Stocks on a steady decline?
They become at risk of short selling.
If everyone up and decides to sell a major amount of shares all at once?
Stock tanks.
A ton of short selling suddenly happening, attempting to buy and psych other investors out?
The recipe for a bubble.
This is why it’s left investors pulling their hair out when Gamestop, AMC, and other “deadstocks” took meteoric rises, just to crash weeks later when sharks sold their shares.
Market fluctuation is a standard among stock investors, and it has never been more prevalent than now that internet forums and twitter feeds can overturn trends overnight. Let this serve as a perfect reminder to us casual investors: long term may have risks, but could serve higher gains, especially when taxes and unpredictable Reddit investors are involved. Despite the short selling, there are still long gains to be made. At this point, those who still have cannabis in their portfolios say to buy low, hold on to it, and don’t panic.
Just whatever you do, click past the daily charts and news hype that try to manipulate you into selling quickly (it’s intentional, all stock platforms do this, don’t fall for it). Instead, look at the company’s progress in the past 3–6 months at least, a year or more if you can, to better judge if something is a good long-term investment, because that’s where the real money’s at. Have patience, and think before you sell.
Conclusion, despite the short term gains and losses that hit the news, stay steady in your cannabis investments, and if you haven’t already bought stock in any marijuana companies, now is a pretty good time to do it, as most stocks are hitting lows that probably won’t be seen again.
