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Business man holding marijuana stocks plant

Marijuana Stocks: Whacky Tobacky? Snoop Dogg’s Investment Advice

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His claim to fame is his music and his love for the marijuana plant. The iconic rapper is currently worth an estimated $135 million. However, he could look to possibly double that with the help of the cannabis plant. Snoop currently has compiled $25 million in funds specifically targeting the marijuana stocks craze in the markets.

Snoop seems confident in his investments, but this type of investment leaves me, and others, reluctant.  The problem is that the US Government still holds the right to crack down on State laws that contradict the Federal law- which still considers marijuana illegal.

Marijuana Stocks Have Low Earnings, High Evaluations

I’ve been inundated with clients from all over the globe asking about this ETF trading in the Toronto exchange that has reportedly shot up 17% the first month of its existence. After much research, I found that there are only 14 stocks in the ETF, which is called Horizons Medical Life Sciences. The fund boasts that it is a global fund, which leaves me skeptical. 10 of the 14 are based in Canada and trade on the wild Toronto Exchange. All of these companies trade on the OTC, or pink sheets. I couldn’t even find one company that had a total equity of $100 million. My biggest concern is that the holdings are trading at remarkably high evaluations with very little earnings yet. So, in other words, one cannot evaluate on a price to earnings basis.

So then, how can one safely invest in marijuana stocks without getting wrapped up in the new Attorney General Jeff Session’s legal web? The answer is quite simple. Buy stocks that supply marijuana growers with the materials they need to grow. This includes fertilizers, hydroponics, or even lighting. All of these avenues avoid any legality issues going forward. They are also necessary for the rising marijuana industry to continue to produce and grow- and the stock prices speak for themselves. For example, in the past 12 months, Miracle Grow has more than doubled its market value. Or, some investors are turning to pharmaceutical companies, such as Cara. Cara’s stock soared 170% in the last 12 months while they focused research on cannabinoid receptors for alleviating pain.

Watch the Hype

In conclusion, this sector is at the whim of the government’s regulations and this market is merely over-hyped. These companies are currently being valued as if the Federal Government has already legalized marijuana. In my professional opinion, these marijuana stocks investments are not worth the risk. However, any investor can take advantage of an over-hyped market and still make money. I recommend staying on the legal side of these investments for the time being, as I do not foresee Miracle Grow being deemed criminal any time soon.

 

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