The expectation has long been that marijuana would be among the fastest-growing industries in the world over the next decade. We’ve already witnessed global cannabis sales more than triple over the past four years, and know that tens of billions of dollars in sales are undertaken annually in the black market. The demand is there — it’s simply a matter of continuing to legalize in new markets, and coercing consumers to purchase via legal channels.
Of course, the cannabis investment thesis has taken a big hit in recent months, and it has some folks questioning whether marijuana stocks can really deliver the green at all…
1. Growing pains are a natural part of any “next big thing” investment
First of all, growing pains were fully expected within the marijuana industry.
Over the past quarter of a century, investors have witnessed a flurry of “next big thing” investments take shape. The rise of the internet, business-to-business commerce, genome decoding, blockchain, and 3D printing are examples of hot trends that investors latched onto. However, none of these investment trends were able to hold their parabolic valuation gains, because investor expectations for such trends always outpace reality.
The thing with the “next big thing” is that, typically, there’s no precedent. This makes it incredibly difficult for even seasoned Wall Street analysts and investors to predict what sort of challenges an industry will encounter. In June 2018, pretty much every Wall Street analyst was counting on oversupply being Canada’s biggest concern. Yet here we are in November 2019, and growers simply aren’t able to get anywhere near enough of their product in front of consumers in retail stores. It’s impossible to know ahead of time what sort of growing pains a hot investment trend will encounter.
Mind you, this doesn’t mean the cannabis industry can’t meet lofty global sales expectations in 10 years’ time. It’s just going to be a bit bumpier than the pie-in-the-sky forecasts had portended.
2. There’s more to marijuana stocks than just growers
Sure, marijuana stocks have been awful investments of late, but there’s more to the industry than just buying the four or five most popular Canadian growers. If you’re willing to do a little homework, you’ll find ways to avoid a lot of the unpredictability, supply-chain problems, and excess taxation that have plagued the North American weed industry.
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