Marijuana-related stocks have been surging lately because a lot of people believe cannabis will be legalized in the United States soon. But the sector has many of the hallmarks of a speculative bubble, and probably needs a major shakeout before the average investor should consider adding marijuana to a portfolio.
“Cannabis stocks are a fad,” said George Boyan, president of Leumi Investment Services. “Who knows where the market will go? And the problem with speculative investments? They all have an expiration date.”
Think of all the e-commerce companies that went public in the late 1990s not named Amazon(). Most of them are now gone.
That’s not to say that the business of cannabis is doomed to fail. Some companies will probably make big bucks from selling recreational and medical marijuana.
Mergers could help the market mature, but we’re still waiting for some consolidation to take place.
Aphria (), a Canadian marijuana grower, this week rejected a hostile takeover bid from rival Green Growth Brands ( ), for example.
More giant consumer companies need to invest in the sector, too. There’s constant speculation about the likes of Coke (
Some big business support has arrived.
Tilray () has a deal with Novartis ( )-owned Sandoz to work on medical cannabis products in Canada and other countries where cannabis is already legal.