The Canadian cannabis sector, besides perhaps cryptocurrencies such as Bitcoin and blockchain technology, has been the talk of Bay Street in 2017.
Every investor and their grandmother appears to be rearing into the cannabis sector, and as valuations soar and the industry continues to consolidate in its infancy, marijuana investors have raked in the “green” in what has been a very profitable 2017 (and beginning to 2018).
The new exchange traded fund (ETF) on the block which tracks a diversified portfolio of Canadian and international cannabis-related concerns, Horizons Marijuana Life Sciences ETF (TSX:HMMJ) has performed incredibly well through the end of 2017, more than doubling since its inception in April of last year.Any ETF which can boast gains of more than 100% in approximately three fiscal quarters should be given a gold star; that being said, investors hoping for a repeat may have their work cut out for them, as valuations approach the stratosphere.
Unlike technology companies which can maintain very high margins and very high growth rates for very long periods of time, companies operating in the commodities sector with unrealistic expectations toward both margins and growth tend to get hammered in the medium-term as high-growth, momentum investors flood out of said names and into the next “big thing.”
Worries that sector-wide headwinds may be on the horizon (excuse the pun) for this up-and-coming sector are realistic, and as such, I remain on the sidelines.Invest wisely, my friends.