For decades, though nobody was really sure why, April 20 has been the unofficial holiday for marijuana users and a joke by and about them.
Now, though, it’s also a reminder of how quickly marijuana is moving from illegal and a joke to a multi-billion dollar legal business — and a good time for us to take another look at how well cannabis stocks have been doing.
Publicly traded cannabis companies have reported strong sales since Canada legalized pot last October and several US states voted to approve recreational and medical marijuana use.
Cannabis has also gone mainstream thanks to big investments and partnerships between marijuana sellers and blue chip consumer companies.
Corona owner Constellation Brands (STZ) has a more than 35% stake in Canopy Growth (CGC), a Canadian cannabis company that intends to take a bigger step into the United States with plans to buy American cannabis firm Acreage Holdings.
Constellation also disclosed Thursday it may eventually boost its stake in Canopy to 50%.Marlboro-owner Altria (MO) invested $1.8 billion in cannabis producer Cronos Group (CRON).
Tilray (TLRY) is working on cannabis-infused drinks with Budweiser owner AB InBev (BUD).
But many of these stocks have soared this year already — Cronos is up nearly 60% so far while Canopy has gained 70% — leading to questions about whether this is just a speculative mania like tulips and dot-com companies.
Bubble or bargain?
“This business is still in its infancy. It’s like investing in alcohol post-Prohibition. There will be tons of growth,” said Dan Ahrens, chief operating officer with investment firm AdvisorShares. “But there are going to be home runs and there will be lots of strikeouts.”
Ahrens thinks that investors need to be patient and selective. But he believes they will be rewarded — that is, if they wind up picking the winners.”These are new, up and coming companies. There is going to be volatility so you have to be selective,” Ahrens said, adding that he favors companies that haven’t already shot up because they’ve done big deals like Canopy and Cronos have.