The cannabis sector is one which has been hit very hard over the past two years. This sector was in dire straits even before the coronavirus pandemic hit. Domestic Canadian consumption is not matching up to investor expectations.
Global pursuits of many Canadian producers is falling by the wayside as companies continue to focus on downsizing and becoming profitable. Thus, this sector may seem like a terrible investment today.
That said, there is some hope for aggressive growth investors, seeking undervalued growth opportunities in a market that is out of control from a valuation perspective today.
Once bubble-like investments compared to some technology companies today, certain marijuana producers actually look cheap on certain metrics. Investors who may have missed the last ride pre-legalization may get another crack at another booming sector if the stars align again.
Assuming government stores begin to open on a large scale and prices come down from consumers driving demand to legal channels from the black market, an ETF like the Horizons Medical Marijuana Life Sciences ETF (TSX:HMMJ) could turn out to be a winning investment over the long haul.
Because each individual producer carries a significant amount of idiosyncratic risk, owning a basket of such companies through an ETF like this is the only way to play this trend, in my opinion.
Invest wisely, my friends.
