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Cannabis Investments Market Analysis


While the country might be sky high after legalization day, cannabis stocks are headed in the other direction.  

The day has finally come

Years of anticipation, since Trudeau promised to legalize cannabis, have created one of the hottest markets in the world right now. A market 2nd only to cryptocurrency in it’s returns. It’s not uncommon to find a cannabis companies with 1 year returns of 200%, 300% and even 400%. Canopy Growth Corp (WEED) the largest cannabis company by market capitalization peaked at a 480% 1 year return before legalization. Aurora Cannabis, also peaked around 460% 1 year return before legalization. Aphria was near 180% 1 year return before legalization. Notice, however how all these astronomical returns were prior to legalization.

Market Reaction

Since legalization on the 17th the top five largest cannabis companies by market cap experienced an average loss of 25.33%. We believe this is a result of investors starting to get smart about the companies they invest in. A few months from now we will start to see the first real earnings of these companies. Investors will see how consumers react to legalization and what sorts of revenues these cannabis companies can actually take in. Prior to legalization the cannabis sector was a highly speculative area. Valuations predicated on supply deals, mergers, acquisitions and outside investment. All while most of these companies have little to no revenue at all. We also highly suggest taking a look at companies with solid R&D divisions, and those with solid fundamentals, not just flashy companies that know how to attract investment dollars(Example HUGE ).

We expect the cannabis sector to continue to experience heavy volatility and price fluctuations as investors try to value these speculative stocks. Our current strategy is to take advantage of market revaluations through pair trades. Read more about it here.

First day sales estimates

There is good news however. Consumers have reacted well to legalization so far. On the first day of legalization we estimate that roughly 146,930  transactions occurred valued at around $10,246,898.20. With such a healthy expenditure the first day we’re confident that consumers support and are willing to purchase through the legalized channels. While first day sales will likely be higher than your average day going forward it is very likely that we will see millions in revenue a day.   

It’s going to be a bumpy ride over the next few months in the cannabis sector, but we’re excited to see what opportunities arise during that time.

Enjoy the rollercoaster, we know we will

Happy Investing – The Stock Boys