This Day On The Street
Continue to site
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Beware of Getting High on Marijuana Stocks

NEW YORK (TheStreet) -- If you need proof that we are entering the mania stage of the stock market cycle, look no further than the action in marijuana-related stocks this year.

I know what you're thinking. What serious investor would actually be writing about these stocks?

This is not about the stocks themselves, though, but what growing investor interest in these companies is telling us about overall market sentiment.

In the early stages of a bull market, investors who capitulated during the prior bear market will start to wade back in, usually with high-dividend or defensive stocks. As the bull market progresses and investors become more confident, new entrants are more likely to seek out stocks that are more economically sensitive, such as small caps or cyclicals.

In the latter stages of a bull market, new entrants who missed much of the prior rally will inevitably chase whatever has the most extreme recent performance. That is the only way these investors can attempt to catch up to the enormous gains they have grown tired of hearing about from friends and relatives.

We are likely entering that stage. With the S&P 500 up over 170% during the past five years, investing in a consumer-staple stock such as Coca-Cola (KO) or Johnson & Johnson  (JNJ) isn't going to cut it if your objective is to double your money in a short period of time. You need something with extremely high volatility and a compelling growth story; earnings and cash flow are optional.

Enter the marijuana industry. With growing legalization for medical purposes across the country and the passage of laws in Colorado and Washington that allow marijuana for recreational use, the growth narrative is in place.

Naturally, investors are looking for ways to capitalize on this growth and have bid up a number of companies related to the industry with colorful ticker symbols. Some of the companies are Growlife (PHOT), Hemp Inc. (HEMP), Cannibis Science (CBIS) and Medical Marijuana (MJNA).

1 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
SYM TRADE IT LAST %CHG
AAPL $130.28 0.00%
FB $81.53 0.00%
GOOG $565.06 0.00%
TSLA $218.42 0.00%
YHOO $44.52 0.00%

Markets

DOW 18,080.14 +21.45 0.12%
S&P 500 2,117.69 +4.76 0.23%
NASDAQ 5,092.0850 +36.0220 0.71%

Partners Compare Online Brokers

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs