Canadian Prime Minister Justin Trudeau announced that the recreational use of marijuana will be legal starting October 17, 2018. The government originally promised Canadians could legally spark up by July, but the date was pushed back by a few months. This gives both the provinces and producers more time to get ready.
It should also give investors interested in pouring money into marijuana and cannabis stocks time to do their due diligence. Unfortunately, many investors have not had the proper guidance on marijuana stocks or been provided with the right expertise about when to buy marijuana stocks and what to look for.
Recreational Marijuana Use in Canada
On October 17, Canada will be the only major economic power to legalize the use of recreational marijuana. Uruguay is the only other country in the world to legalize pot. In the U.S., nine states have legalized marijuana for recreational use and 29 other states have approved marijuana for medical purposes.
The Cannabis Act, officially known as bill C-45, opens up a whole new multi-billion market for investors, not just in Canada, but around the world. Not surprisingly, most Canadian marijuana stocks climbed higher after the historic vote took place. But not all marijuana and cannabis stocks are created equal and some will do a lot better than others during the early days of the marijuana market boom.
Choosing Marijuana Stocks to Invest in
There are in excess of 75 different companies that operate, in some capacity, in the marijuana industry. This includes everything from pharmaceutical giants to upstart penny stocks and everything in between.
Pharmaceutical giants that have divisions that use marijuana and cannabis will obviously benefit from Canada’s recent legislation, but because they are already big companies and only generate a small percentage of their revenue from marijuana sales, their share prices may not experience huge moves. But they are stable.
On the other hand, marijuana penny stocks are small and could experience strong gains in the early days, but then again, they are small penny stocks, and are going to be extremely volatile. That said, a lot of investors have made a lot of money on penny stocks over the years.
Investors don’t need to shun marijuana penny stocks just because they’re penny stocks. There are some great marijuana penny stocks out there. The key is knowing how to separate the marijuana from the chaff. That can be difficult, since there is often very little reliable information on a penny stocks fundamentals and business plans.
Then there are the established names like Canopy Growth Corporation (TSX/WEED) and Aurora Cannabis Inc. (TSX/ACB); brands that took risks and gained an early foothold in an industry that was setting up for the promise of the legalized use of recreational marijuana.
Keep in mind, many investors started buying marijuana stocks and sending the prices considerably higher long before it was announced cannabis would be legal in Canada. Meaning, it can be difficult for some investors to understand the true value of marijuana firms, since the legalization of marijuana has already been baked into the share prices.
Investors anxious about making money on marijuana stocks may need to act cautiously in the run-up to October 17, 2018.
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Photo Credit: iStock.com/Kazyaka
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