420 day comes and marijuana shares are on fire
But many of these shares have already increased this year – Cronos is up nearly 60% so far, while Canopy has gained 70% – which raises the question of whether this is just a speculative craze like tulips and dot- com companies.
Bubble or bargain?
"This business is still in its infancy. It's like investing in alcohol bans. There will be tons of growth," said Dan Ahrens, managing director of investment firm AdvisorShares. "But it's going to be homeless, and there will be many strikeouts."
Ahrens believes that investors must be patient and selective. But he believes that they will be rewarded – that is, if they turn up to win the winners.
"These are new, upcoming and upcoming companies. It's going to be volatility, so you have to be selective," Ahrens said, adding that he favors companies that haven't already shot up because they've made big deals like Canopy and Cronos have.
Rob Almeida, global investment strategy with MFS Investment Management, says investors can come ahead of themselves. He is worried that cannabis shares will turn out to be an investment dish like 3D printing and blockchain companies.
"Cannabis is not going to have parabolic growth," Almeida told CNN Business. "There is a lot of hope and enthusiasm."
Cannabis prices fall
One reason for concern: Now that several states are legalizing marijuana usage, prices fall as competition has increased.
Research company BDS Analytics, which calculates a consumer price index for the cannabis industry in the United States, recently reported that total February prices for products such as intake, cream, vaporizers and vape pens and pre-rolled joints fell 2.7% from February 2018. Prices were down almost 2% from last month.
Many of the listed companies have traded a decline in the retail price in Canada since legalization in October last year.
Aphria, for example, reported sales this week as missing forecasts. Stocks cast nearly 15% on the news. But the stock is still up over 40% so far in 2019.
More offers likely on the way
Canopy plans to buy Acreage may lead to another consolidation weapon.
Matt Hawkins, CEO of Cresco Capital Partners and an investor in Acreage, said in an email to CNN Business that "this is the moment the cannabis sector knew about coming – consolidation."
Hawkins added that the agreement "will lead to a rush of cannabis companies merged to compete with Canopy / Acreage" and that "it will now be very difficult for early start to enter the room and compete with growing / emerging conglomerates. " [19659013] In other words, there is another sign that cannabis goes legit : It is starting to work just like any other major consumer industry.
