Why Long-term Investors Ought to Ignore Pot Stocks Altogether

The discussion of where the recreational and medical marijuana markets will be in 10 or 20 years is what has led, in my opinion, to much of the madness represented so well in the atmospheric valuations of most Canadian pot producers today.

It is undoubtedly a sexy story – buy into one of these small producers today and you could own a piece of “the next Amazon” before you know it!

I’ve stated many times that this most recent stock mania surrounding marijuana producers closely resembles the dot-com boom of the late-90’s, because it really does. Sentiment drives most stock rallies, and investors buy into rumor, in many cases, paying more attention to who may be bought out by whom than the actual top and bottom lines of the companies actually reporting to investors.

When the profit a company makes somehow becomes a very distant second to the growth potential, number of square feet of space, or intrinsic takeover value of a given firm in a sector, alarm bells begin to ring and caution (should) become the word for those considering investing in such an environment.

It’s impossible to say “we’ve never seen this before” because we have. Bubbles and stock mania pop up now and again, often supported by burgeoning industries that may indeed change the world, but inevitably end up morphing into a scene where one or two big winners belie the hundreds of bankruptcies which can have a destructive effect on the life savings of some investors who pile everything into one of these enterprises.
 

If you must invest in cannabis, please, do so responsibly. Put a very small portion of your net worth in these things – many of these companies will not last, believe me.

Invest wisely, my friends.