Marijuana stocks have been building a meaningful bottom since November—and there are good and bad aspects to that.
On the good side, it means that you’ve had the opportunity to buy low—so you can sell high later on, or just hold to build long-term profits. On the bad side, it means that until the sector revives, any money invested in marijuana stocks (in general) will not perform as well as money in sectors that are currently strong.
But it’s possible that the kickoff to this nascent marijuana stock rally was sparked by last week’s excellent earnings report by industry leader Canopy Growth (CGC). The action of the stocks in the days ahead will tell us a lot.
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In the meantime, the long-term prospects for the industry remain excellent, and with most of the quality stocks having bottomed, the long-term risk/reward ratio looks very favorable for the sector’s best stocks.
Fundamentally, many companies, in both Canada and the U.S., continue to suffer from slower-than-expected openings of retail outlets. And the newest bad news from Canada is that Labrador, Quebec and Newfoundland, having seen the troubles caused by vaping illness in the U.S., have banned cannabis vaping devices in their provinces—and that means the gains from Cannabis 2.0 will be a bit less than expected.
But Ontario still aims to triple its number of legal marijuana outlets this year. And somewhere down the road, the holy grail of federal legalization in the U.S. will be achieved. My goal is to have readers like you invested in the stocks of the best U.S. marijuana companies when that day arrives. However—and now we’re looking rather far ahead—it’s quite possible we’ll be selling when that day arrives.
Remember, marijuana stocks peaked when marijuana was legalized in California, Colorado and Canada, so the odds are very good that the stocks will peak on the day it becomes legal across the U.S. The market always looks ahead.
So the key to making profits is to buy when the news is bad (like now) and the stocks are down—and then to sell when the stocks are up and the news is great.
Final note: The number one mistake of amateur investors is holding onto losing stocks—watching their losses get even larger. Experienced growth stock investors know that cutting losses is critical, especially when a stock has no support level in sight. So, while the best marijuana stocks have bottomed and are building bases and even early uptrends, if one of your marijuana stocks is hitting new lows, you should consider selling.
And if you want to know what cannabis stocks to buy amid this developing marijuana stock rally, you can try out a subscription to my Cabot Marijuana Investor advisory, where despite the recent downturn in the marijuana sector, we have an average gain of 59% among the stocks in our portfolio.
To learn more, click here.
Editor’s Note: This post was excerpted from the latest issue of Cabot Marijuana Investor.
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