7 Things To Know About Medical Marijuana Stocks To Buy
The Momentum Attracting New Investors
There is definitive excitement surrounding the cannabis industry given that the state of California is making strides in creating a legalized recreational market. Los Angeles voters have approved Measure M, allowing for the creation of regulations covering adult-use marijuana, possibly putting the City of Angels in a position to usurp Denver's throne as the marijuana capital.
That momentum is attracting new investors into what's called the pot stock market, but as newer investors, they might know that this market has had hiccups. This article will go over some important things to know about medical marijuana stocks to buy.
Marijuana Stocks Move Together
There is a correlation among marijuana stocks: One of the issues in the pot stock market is that marijuana stocks seem to trade in virtual lockstep with one another. If a White House press secretary puts out comments seen as negative to this industry, the whole stock sector goes down. Most of these particular stocks trade on swings in the news and not on their very own merits.
This market is thriving with fresh entrepreneurs as big companies stop rejecting this industry as too risk-laden. Enthusiasm and growing desire bring more players to the field. On the other hand, newer investors to the marijuana sector need to keep all these things in mind as they contemplate putting hard money into what is admittedly a speculative sector.
"Actual" Marijuana Stocks
Many businesses are associated with the marijuana industry on the bigger exchanges, such as Nasdaq or the New York Stock Exchange. Many insiders of the cannabis industry consider a few companies as biotech, and not 'actual' marijuana stocks; Zynerba, Insys Therapeutics, and GW Pharmaceuticals are examples. Likewise, the NYSE-traded Innovative Industrial Properties, is a REIT investing in grow facilities, and as such viewed as more of a real estate business.
If your stomach for actual cannabis stocks is weak, these stocks might be a better place to start. Most actual marijuana stocks are traded in over-the-counter market spaces, where the degrees of transparency are variable. Sticking with businesses in the OTC QB and QX level might be advisable over anything involving the pink sheets.
Revenue Figures Do Matter
If an investor really wants to check up on a business, they need to get their phone and call that company. It's a bad sign if you only get a voicemail, a full mailbox, or no answer at all. Use financial websites like Yahoo Finance to find out if management is selling their own shares. They won't be if they personally believe in their company.
Newer investors can find the stock filings of any publically traded company through exchange sites or the Securities Exchange Commission. The finance pages of Google and Yahoo both have necessary information as well. It's always critical to check out revenue figures to make sure there is at least some money coming in. In the time of the days of the Colorado effect, a lot of pot stocks were traded just on notions or the fact that the business had 'cannabis' in its title, without actual business backing things up.
Be Wary Of Stocks That Are Promoted Heavily
If it seems like a pot stock you're looking at is always in bright sunshine, have your doubts. Any company that puts out numerous press releases be it weekly or even daily, is one to be wary of. A legit company is only going to issue their press releases when there's actual news, and that doesn't happen daily.
Marijuana news sources and newsletters that speak only in glowing terms of businesses are often getting paid to do just that. Any company, even a good one, is going to have a little negative press. If you're considering a company that's featured in a news story that fails to mention any possible weak points for the business, then proceed with caution.
In-Depth Reviews Are Critical
Many traders buy particular stocks and then go publish or highlight the positives written about that company to get the stock price to rise. An unsuspecting investor might not be aware that such traders exist, much less that they then sell their shares, reaping up profits. The California Cannabis Business Expo warns visiting investors to brush up on their homework on any stocks that draw their interest.
Before jumping in, check a site like StockPromoters.com. You can check to see if any company registers on the list of highly-promoted stocks. Investors should also be wary of the Facebook page Fabulous Penny Stocks that actively promotes stocks often.
MJIC Marijuana Index
New investors should review stocks listed on this index for ideas and inspiration. This index only lists businesses with at least 50-percent cannabis involvement and also meet particular trading requisites. This Index features 17 distinct companies, four of which are based out of Canada but also operate within the United States.
Marijuana Stocks Have Top-Notch Rates
When Colorado decided to legalize marijuana for adult use, pot stocks went way up; it even got named the Colorado effect. Many shell companies slapped words like green, cannabis, or marijuana into their titles, the races started. A stock such as Growlife, Inc. showed a revenue of $8 million, but the market cap was $850 million. 2014 trading put the stock at around 50 cents, but then trading got suspended thanks to questions and concerns about the accuracy of the information. More recently, the company was listed with a market cap of $16 million, with stock shares trading at around a penny in value.
Should new investors identify a stock they specifically want to invest in, it makes sense to shop around for various trade prices, while also choosing a trading site that doesn't charge too much for each trade. A new investor also ought to consider buying in stages. A good recommendation is only using a quarter of the available investment money on an initial trade to see what can happen before committing the rest.