Cannabis stocks have been on a tear since their March lows.
The sector is far outpacing the broader market.
While the S&P 500 Index is up 35% and the tech-heavy Nasdaq composite index has risen 37% since March, the Horizons Marijuana Life Sciences Index Fund (HMMJ.TO) has skyrocketed 63% from its low.
If you invested $1,000 in HMMJ 11 weeks ago, you’re sitting on $1,630 now:
This fund holds dozens of marijuana stocks, including growers, pharmaceutical companies and more.
Exchange-traded funds (ETFs) like HMMJ are a great way to get a snapshot of a sector. And if you want exposure to the industry without spending hours analyzing stocks, HMMJ and other cannabis ETFs are an easy way to invest.
But here’s the thing: If you had an expert doing the heavy lifting for you — picking out the three or four best stocks of the bunch — you’d be doing even better.
For instance, Real Wealth Strategist Editor Matt Badiali has identified the top four cannabis stocks in his newsletter.
Bankruptcy Risks Abound
The reason we recommend you invest with expert advice is that cannabis can be perilous.
If you decide to invest on your own — without the help of an expert — pot stocks can be high-risk.
Take, for example, a company Matt discussed in his Marijuana Market Update on Wednesday: Green Growth Brands Inc. (GGB.CN).
In January 2019, Green Growth attempted a hostile takeover of Canadian cannabis producer Aphria Inc. (NYSE: AHPA) with a bid of C$2.5 billion (US$2.06 billion). Aphria rejected the bid a month later because it said Green Growth undervalued the company’s operations.
The takeover bid got investors’ attention, though. In January 2019, Green Growth’s stock traded for over C$6.
It continued to fall from that high, plummeting to C$0.47 per share by the end of 2019.
Last week, the company filed for bankruptcy.
As Matt put it: “If you held shares in that one, that money went to heaven.”
Green Growth is the most recent cannabis bankruptcy in a string that includes CannTrust Holdings Inc. and James E. Wagner Cultivation Corp.
Expert Advice is Key
I asked Matt to sum up what makes cannabis stocks so risky. He told me how, with the right guidance, the recent rise is just the start of where the best stocks in the business are going.
Here’s what he said:
Cannabis is a brand-new industry. Many of these companies are learning how to build out their businesses as they go. Unlike an established industry, such as clothing or real estate, cannabis has to build out from the farms all the way up to retail.
There are a million ways these companies can misstep. And investors who don’t know the signs will pay the price. I still hear from folks looking for some way to recover cash that they lost in bankruptcies like CannTrust and Green Growth Brands.
However, that risk is also our potential reward. I remember when energy drinks just showed up on the scene. They were a marginalized beverage. They marketed to young people and alternative markets like skiers and thrill-seekers. They found a niche away from traditional soft drinks…
And Monster Beverage (Nasdaq: MNST), the maker of Monster Energy and other brands, was a huge winner. Its shares were less than $1 each in early 2005. Today, they trade for more than $70. That’s a 6,900% gain. And I believe cannabis stocks can and will follow a similar path.
However, while Monster was far and away the best performer in public energy drink makers, there will be many winners in cannabis.
It takes effort to avoid putting your hard-earned money in the next CannTrust or Green Growth Brands. A little expert advice could save you a fortune.
For less than the cost of a cup of coffee each month, you can get access to Matt’s Marijuana Millionaires special report, which details the top cannabis stocks that are set to skyrocket — as well as his continued guidance on navigating the cannabis sector and several others for the next year.
Finally, we have more great content to share with you.
2 More Youtube Videos
John Ross’ new 13-minute Reading Tea Leaves video, “Vaccine Race Intensifies for Novavax Inc. (Nasdaq: NVAX).”
And Alpha Investor Report Editor Charles Mizrahi’s eight-minute video, “Dump These 2 Sick Stocks: Buy This Healthy Stock Now.”
On Monday, Matt Badiali will reach out to tell you about a recession-proof group of stocks you should buy right away.
Senior Managing Editor, Winning Investor Daily