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). And 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. AdvisorShares just launched the Pure Cannabis ETF (YOLO), an actively managed fund that invests in cannabis stocks. Some of its top holdings are Canadian cannabis companies CannTrust (CTST), Aphria (APHA) and Hexo (HEXO).Rob Almeida, global investment strategist with MFS Investment Management, said investors may be getting ahead of themselves. He's worried that cannabis stocks are going to turn out to be an investing fad like 3D printing and blockchain companies. "Cannabis is not going to have parabolic growth," Almeida told CNN Business. "There is a lot of hope and enthusiasm."
Cannabis prices are falling
One cause for concern: Now that more states are legalizing marijuana use, prices are dropping as competition has increased.Research firm BDS Analytics, which calculates a consumer price index for the cannabis industry in the United States, recently reported that overall prices in February for products such as ingestibles, topical creams, vaporizers and vape pens and pre-rolled joints, fell 2.7% from FebruaryRead More – Source[contf] [contfnew]