By Robert Bacarella | August 19, 2019

The cannabis market is rapidly expanding and subject to enormous hype as cannabis is increasingly becoming legalized for recreational and medical use worldwide. There has been a “Green Rush” to invest in the sector as numerous companies have gone public with many stocks appreciating to near “bubble” valuation levels.

At this stage of cannabis industry growth, we believe that most investors should:

  • Forget investing in penny cannabis stocks
  • Forget investing in inexperienced management teams
  • Forget looking for the needle in the haystack
  • Avoid the sector entirely…but if not, then consider a diversified ETF

Two major investment concerns are the impact of federal legislation impacting profitability and the extent of a large “black market” that is selling products at cheaper prices than regulated dispensaries.

A commodity

Cannabis is a commodity, no different than wheat or corn. We all consume wheat but that doesn’t mean it’s a great growth market. The commoditization of cannabis could easily remove any novelty or brand-oriented premiums assumed for prices and profitability.

Most of the cannabis sector stocks have corrected between 25-50% from their recent highs as many investors locked in profits from extended valuations. The key to higher stock prices will be both state and federal legalization progress which will impact the demand of cannabis usage.

Due to the high risk profile of many of these investments, most investors should first consider investing in cannabis ETFs that will provide exposure to speculative stocks while mitigating risk through diversification. Two cannabis ETFs to consider are Horizon Marijuana Life Sciences ETF (HMLSF) or ETFMG Alternative Harvest Index (MJ).

If you’re drawn to the space, focus only on the leaders

The top industry leaders include Cronos Group Inc. (CRON), Canopy Growth Brands Inc. (CGC), Hexo (HEXO) and Green Growth Brands Inc. (GGBXF), a Jim Cramer favorite. An interesting investment in the space is KushCo Holdings (KSHB), the largest supplier of cannabis packaging that meets regulation requirements.

Are cannabis stocks a good buy right now? Generally, no. Most cannabis companies are generating revenues but still losing money. If you decide to invest in this sector, expect high volatility and be ready to cut losses. There are a lot of snakes in this grass so be careful if you’re watering any of these weeds.

Cannabis Stocks

We make it simple for everyone to invest easily and sensibly.

All too often, people over-complicate the investment process. Our goal is to break down investment myths and concepts to help individuals make sound long-term investment decisions. Your financial future starts here.

Low Minimums

Investing doesn’t have to feel out of reach for you financially. At Monetta, you can start with as little as $100 with an automatic investment plan of $25 or more per month.

Learn More

Built-In Diversification

The Monetta Core Growth Fund consists of a highly diversified “passive” component together with an actively managed component that consists largely of companies that are household names. The Monetta Fund is a classic “stock-picking” fund focused on large-cap growth companies.

Learn More

Commitment to Education

The earlier you start an investment portfolio, the longer your money can work for you. It’s time in the market, not timing the market, that matters. We provide ideas and resources for people of all ages to get started and keep making progress.

Learn More

Fund Performance

Monetta Money Talk Newsletter

The Monetta Money Talk newsletter is a fantastic resource for continued financial education and resources. Sign up today to receive our quarterly newsletter!

The Funds’ investment objectives, risks, charges and expenses must be considered carefully before investing. The summary and statutory prospectuses contain this and other important information about the investment company, and may be obtained by calling 1-866-964-4683, or visiting www.monetta.com. Read it carefully before investing.

Opinions expressed are subject to change at any time, are not guaranteed, and should not be considered investment advice.

All investments, including those in mutual funds, have risks and principal loss is possible.

Click here for the Monetta Fund Holdings
Click here for the Monetta Core Growth Fund Holdings
Fund holdings are subject to change and are not recommendations to buy or sell any security.

Past performance does not guarantee future results.

FUND DISTRIBUTOR: Quasar Distributors, LLC.