Are Marijuana Stocks Really Overvalued

  • By Trevor
  • July 4, 2017
  • Comments Off on Are Marijuana Stocks Really Overvalued

After the induction of Marijuana Stocks on various North American Stock Exchanges, a lot of talk on the true value of these companies has become a very common topic.  A surge by marijuana investors to purchase marijuana stocks has blossomed. The thought process does make sense though. I mean, with legalization, a bigger market will exist and hence one would assume the value of the company would also appreciate. Sadly, a lot of folks with that thought process, are probably gonna get burnt with marijuana investments. I BELIEVE many marijuana companies will not survive and many others will remain penny stocks for a while.

Under the definition of Penny Stock by the SEC (Securities and Exchange Commission), the majority of marijuana stocks today fall under this classification. In simple terms, many marijuana stocks are currently trading below $5 per share. These stocks are commonly considered extremely speculative and high risk because of their deficiency to liquidity, large bid-ask spreads, small capitalization and limited following and disclosure. At this stage, with all the opacity surrounding the law and how to interpret it, it makes it very easy for marijuana stocks to be classified as VERY HIGH RISK. Speculation is inevitable in today’s markets, but when it comes to marijuana stocks, the speculation is not really supported by vibrant investment strategies.

So, with all this speculation, traders are advised to be very careful. Until clarity surrounding federal marijuana laws is addressed in North America, the risk with marijuana stocks remains very high. However, one of the laws of investments does specify that, THE HIGHER THE RISK, THE HIGHER THE POTENTIAL RETURN.

Keep in touch with Pot N Politics this month, as we explore more on this very interesting topic on Marijuana Stocks. Remember, legalization is just around the corner and is as sure as death. Keep the bongs loaded and the joints burning folks.

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