Time To Invest In Cannabis Stock?

Some investors are high on these stocks. But the prospects for cannabis companies are hazy.

- Ryan Ermey

Call it the green rush. Or the green wave. Either way, the movement toward legalized marijuana use in North America is gaining ground. November’s midterm elections saw Missouri and Utah join 31 other U.S. states where medical marijuana is legal. Michigan voters made their state one of 10 (plus the District of Columbia) where recreational use isn’t a criminal offense. Canada recently became the first industrialized nation to legalize recreational marijuana use nationwide.

The prospect of continuing momentum has investors seeing green in more ways than one, but those who have been riding the green wave thus far have had a wild run. In advance of Canada’s October 17 legalization, Canadian cannabis stocks soared. Canadian pot firm Tilray was trading in the low to mid $20s for much of August before the share price spiked to an intraday high of $300 in September. The shares have since receded dramatically, trading at $100 in early December.

Shares in other major Canadian growers and distributors, such as Canopy Growth and Aurora Cannabis, followed a similar, if less extreme, trajectory: a huge run-up prior to legalization followed by a pullback due to concerns over industrywide supply shortages. Despite the volatility, some intrepid investors (and some blue-chip companies) are entering the fray. If you are considering cannabis stocks, here’s what you need to know.

What’s the appeal?