Sweeping changes to the legal status of marijuana are enticing investors to pour money into legal cannabis.
States such as Colorado, Washington and California have all legalized recreational marijuana, opening up new vistas for the business in the United States. But Canada’s decision to legalize marijuana is at least as important to investors.
Perhaps two of the most closely-watched cannabis-related companies are Canadian, and have been listed on either the New York Stock Exchange and Nasdaq. Canopy Growth shares have risen about 65 percent so far this year, while Cronos is up more than 115 percent.
“If you want to be in something that’s very growthy, and actually legitimate as it is legalized and controlled properly, I think this is the place to go,” Carol Pepper of Pepper International told CNBC’s “Squawk Box Europe.”
She adds that medical marijuana has a particularly strong upside for investors.
“The medical applications for cannabis are staggering. The research is being done and I really think this is next huge growth area,” she says. “I think it is a phenomenal plant that is going to a lot of good for the planet and I’m glad it is finally being legalized.”
But where there’s big jumps in stock prices, especially in a nascent industry, there’s also the possibility of a major bubble, as Brian Livingston points out in a column for Marketwatch. He likens cannabis to the dot com bubble of that late 1990s and even the speculative bubble that developed around railroads at the end of 1800s.
The rapid rise of marijuana legalization has created what some people call a bubble for marijuana stocks. It’s reminiscent of the dot-com craze in 1999. An even more apt analogy might be the 1880s, when the transportation miracle promised by newfangled cross-country railroads stoked a mania for profits. Both ended badly: U.S. stocks fell 50% in 2000–2002, after adjusting for inflation, and a quarter of all railroads were bankrupt by 1894.