The theme this week on the Retirement Quick Tips Podcast is: Sure Fire Bets That Fizzled Out

Today, I’m talking about the sure fire bet marajuana stocks, that have been anything but since many states and the entire country of Canada have moved to legalize the drug over the last several years. 

As I mentioned in yesterday’s episode, my home state of Oregon legalized marajuana in 2016. The first 2 states to legalize the recreational use of marajuana were Colorado and my neighbor to the north, Washington, in 2012. And many other states have followed since. 

This newly legal industry seemed ripe for profits as the expected growth was set to explode now that people in many states across the country didn’t have to go to a back alley to buy their hash anymore. 

With public opinion shifting on the legalization of marajuana, the industry seemed ripe for explosive growth, and handsome profits for investors who got in early. 

Investing in marijuana stocks seemed like the right move for many investors. A sure fire bet and an opportunity to get in early while new companies were emerging constantly. 

The problem with investing in pot companies is that the fate of the companies that operate in this space is totally dependent on federal legalization and there’s no telling when or if that will happen. 

Marajuana stocks did get a boost recently when on On Oct. 6 of this year, President Biden announced his administration would pardon all prior federal offenses for simple mari

So it seems likely that eventually marajuana will become legal in the US, but that doesn’t mean that investing in these companies is a good idea.

Canada is a good example of this. The country legalized marajuana in 2018, and by the Spring of 2019, Ontario-based Canopy Growth, was the world’s largest marajuana company. 

Yet, the stock has sputtered since that time, when it was trading around $50 a share. Today the stock trades for $3 a share. Its revenue and profits are in a state of decline, despite being a massive player in a country where marajuana is legal. 

And the problems aren’t just confined to Canopy Growth, according to a WSJ article published in October, “Since enthusiasm about the cannabis industry peaked in 2019, around $35 billion has been wiped from the market value of seven major Canadian cannabis companies listed on New York’s stock exchanges, an 85% drop. Individual investors who used to prop up share prices are mostly gone.” 

And the rules create problems for big and small players alike. The article goes on to say:  “As more entrepreneurs pile in, big listed Canadian stocks are losing market share. Advertising restrictions and plain packaging rules make it hard to build brands that customers are loyal to, as most products look the same.”

So what’s the lesson here?: The fear of missing out on something new and hot is a strong temptation that lures many investors into industries and companies that seem like sure fire winners. You could have easily made the case, like many investors did in 2018, that Canopy Growth and other Canadian pot stocks were only heading higher after Canada legalized marajuana, but the opposite has happened. And the stock and many others like it have crashed hard since pot became legal in Canada. 

Canopy Growth stock is dead at the moment, the future is very uncertain for the company, it can’t make money or grow, and in September of this year, the company decided to close all of its retail locations in Canada.

That’s it for today. Thanks for listening! My name is Ashley Micciche and this is the Retirement Quick Tips podcast.  

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