Investing in cannabis stocks is not for the faint of heart. It is one of the most volatile sectors in today’s market and often reacts to rumours rather than actual company information. Since recreational cannabis legalization in October 2018, “pot stocks” have taken investors on a roller coaster ride of highs and lows.
Early Investors Profited
Pre-legalization investors in the cannabis sector saw incredible gains as legalization sent cannabis stocks soaring. One of the most notable stocks was Tilray (TLRY), which saw growth levels of 300% once the Cannabis Act came into effect. Many investors who were smart enough to take profits before the market levelled out saw huge gains and were rewarded for taking a risk on a new sector.
Since April 2019, the cannabis market has been slaughtered. Stocks prices are down across the board and seem unresponsive to positive company earnings and news. Cannabis companies are in a phase where they are being required to spend large amounts of cash to build the business, which has a negative impact on posted earnings. The one upside to this bullish market is that it may be a great time to buy. With many cannabis stocks at annual lows, there is an opportunity to get into the market at an opportune time.
The Future of Pot Stocks
Although stock prices are down throughout the majority of the cannabis sector, it is an industry that is still in its infancy and growing at a rapid rate. In 2019, cannabis is expected to generate $7 billion in sales, which is projected to grow to $22 billion by 2020. Good business sense says that investing in an industry which is demonstrating strong growth potential is always a good idea.