Stocks in the marijuana industry have been on a strong streak for the past year or so, ever since legalization has become introduced to the masses. With recent times showing a not so positive gain in the industry due to legislative issues, what can the average investor expect when looking for a new stock to invest in?
After a long bull run leading up to 2018, many would expect that this bullish average would continue given recreational legalization in states like California. One of the largest cannabis-based companies recently lost 30% of its value via market capitalization in a short period of time. Two other large companies in the industry, Aphria, and Aurora Cannabis have also seen their shares plummet in recent times. So, many are wondering why this is occurring.
One of the main issues with the industry is the issue with legislation in the U.S. Despite a large number of companies being based in Canada and around the world, the U.S. seems to be the center for purchasing the plant. The mini-crash that just occurred in the market should not be a fear for investors, but rather a show of how much the industry is based on speculation and news. Once the hype of legislative issues is gone, many investors believe that the bear run of the past few days will turn around.
Many investors associate the industry on cannabis with something known as “momentum investing.” This occurs when the price of a stock is driven up, with many investors on the other side, shorting the industry and their positions in the stock. Because of how these stocks are based on the momentum of certain catalysts in the industry such as legislation and beyond, the stocks are subject to price movement. Although the industry itself is not as dependent on the news cycle like many other markets are, this is something that investors should not worry too much about.
Aaron Salz, the founder of the Toronto based stronghold Stoic Advisory, stated that prior to the mini flash crash, the S&P 500 was up 12% in three months, but the cannabis sector as a whole was up 180%.” The cannabis market seems to be booming on its own, without the influence of outside sources such as news and speculation. Salz went on to state that the “Prices had increased by 109 percent during that short period of time, and the overall market cap for just the publicly-traded stocks was $26 billion.” Looking at this information, flash crashes like the one that just occurred in the market should be taken with a grain of salt.
The industry on marijuana has been on a steady and fast growth rate during the past year or two, with the legalization of the plant across many state borders. The industry itself has been using the influx of capital to continue growth and innovation of new products for the market. With the issue of legislation, this growth has slowed down in the past month or so. Many investors expect the market to pick back up where it left off after this most recent news cycle has run its course. After this most recent flash crash and over the course of the next year, the industry is expected to undergo a large amount of growth. This growth will likely come from the fight against big pharmaceutical companies to introduce new, marijuana-based drugs into the market. The massive amount of success that these drugs have shown to the public ensure that they will likely become a larger part of the medical ecosystem in the near future.
It may at times seem like the fight for legalization of marijuana across the board is bleak, but there are too many people fighting against this unfair legislation to let it run dry. The hopes are high that over the course of the near future, legislators will come together with the large influences in the market to help ensure that the industry on marijuana will become stronger than ever, allowing patients to get the help they need and individuals to purchase marijuana for all of the reasons it has against alcohol and other popular drugs.
MAPH Enterprises, LLC | (305) 414-0128 | 1501 Venera Ave, Coral Gables, FL 33146 | new@marijuanastocks.com
