Marijuana Stocks: Buy or Not Buy?

A reader and friend of mine since high school wrote to me the other day asking for my opinion on Marijuana Stocks and if she should buy some or not.  I appreciated the question and was happy to give her my opinion and advise.  Marijuana stocks have come to light with investors due to the recent legalization of marijuana for recreational use in Colorado.  So I thought this would be a good topic to address with my readers and site members as well.

Marijuana stocks have been on the market since the legalization in many states that have approved it for medical use.  Things such as glaucoma, arthritis, ADHD, pain issues not well controlled by conventional methods and those not eligible for surgery for treatment.  It was not until a few weeks ago that it was legalized for recreational use in one state, Colorado.  Do remember that Federal Law still prohibits the use of marijuana and the clash between State Government and Federal Government has yet to take place to see how long these State Laws will be allowed to remain.

In the thoughts of purchasing Marijuana Stocks for your portfolio there are many other issues to consider too.  Questions like, will these stocks benefit my portfolio?  Are you willing and able to loose your investment if things turn bad for this very small sector in the market?  Have you done your homework and evaluated your risk?  Are you savvy in the market and have a good knowledge and portfolio that includes various other individual stocks?  If your answer is "NO" to any of these questions you should not buy marijuana stocks.  All you would be doing is buying them for a novelty to tell your friends you own stock in a marijuana company.  Novelties do not make you money in your portfolio.

Other things we have to consider.  We currently only have one state, Colorado that has approved recreational marijuana for use.  It is tightly restricted with amounts you can purchase. Not every city or county in the state is allowed to sell it.  And it is illegal to cross state lines with it and bring it home with you if you live in a state outside of Colorado.  Who in the future will jump on the band wagon and join Colorado in approving it for recreational use in their state and how long will this take?  You know our political and legal system and things do not tend to move quickly.  How many states might get on the wagon with Colorado and how many won't during your life time?  Probably not many.  Remember we have LOTS of conservative Red Republican states and lots of states with the good ole Bible Thumpers.  Many states still won't embrace the Supreme Court Ruling regarding gay rights.  They are rewriting their state constitution and doing everything they can to fight the ruling.  Such states like Utah and Indiana.  So don't bet money that recreational use of marijuana is going to go over well with too many states.  What states might sooner or later jump on the wagon in follow in Colorado's footsteps?  Perhaps Massachusetts, Washington DC, Minnesota, Florida, California.  I think it could be possible in the far future for Arizona, Rhode Island, and perhaps Iowa or Hawaii.  But that is only a guess and your guess would be no better than mine.

If you are hell bent on adding a marijuana stock to your portfolio now would be the time.  After other states follow in Colorado's footsteps (if they do) the timing would be too late.  If you are one that feels you are willing to take the risk my suggestions would be marijuana stocks such as CANV, CBIS, and HEMP.

Will you find any such marijuana stocks in my portfolio?  The answer is simply "NO"!  First of all these types of stocks are all OTC or Pink Slip stocks, which I refuse to deal in due to their risk factors.  Look at it sensibly.  If they were worthy stocks they would be on the NASDX or NYSE.  Of course there are a couple of OTC stocks that do not fit the normal rule such as Rolls Royce (RYCEY).  With the uncertainty of the future for marijuana stocks I am not sliding them into my portfolio.  I think there are a lot better things I could steer you to in the Healthcare Industry than something like marijuana stocks.  Such as Rite Aide Pharmacy (RAD) which is up 77.5% since August 2013 (In my portfolio).  Forest Labs (FRX) up 59% since August 2013, Bristol-Myers Squibb up 26.5% since August 2013 or how about Gilead Sciences (GILD) up over 48% in 2013.  For you mutual fund investors the best healthcare mutual fund hands down is T. Row Price Health Sciences (PRHSX) which is up 51.40% for 2013.  I just feel there is a lot more opportunity to make money in 2014 than a marijuana stock and I am sticking with those stocks on the NASDX and NYSE that have proven track histories over the years and in the long haul.  I think you will find this to your advantage as well for your portfolio.

I also welcome any of your questions or comments to my blog entry.  Always feel welcome to do so.

Gus S.



Disclaimer: Make sure to review any information found on this blog site with your personal financial advisor before making any decisions. I am providing general information and not financial advise. I am not a licensed stockbroker or financial advisor.