WASHINGTON. In a few columns last year, I explored what still amounts to an underground stock market investing in something that may very well still be illegal where many of our readers live. It’s all about 21st century Reefer Madness, the Strange New World of marijuana stocks and marijuana investing. Plus one associated ETF that holds a basket of these wildly speculative – and mostly Canadian – stocks.
I’ve played around in this still somewhat exotic investment arena before, investment-wise. Not fully grasping the crap-shoot nature of this odd group of stocks, I ended up losing money every single time. That said, I might have been a bit early to the party. So I’ve decided it might be time to try investing in this (so called) medical marijuana patch once again. But only with a bit of mad money. Real investment funds have no place here, at least for now.
So beware: These stocks, and their respective ETFs, are highly, highly volatile. Like Reefer Madness itself, as that old 1936 film once warned us. And if that makes you nervous, you should probably avoid the modern marijuana patch altogether.
Reefer Madness by ETF: MJ, the ETFMG Alternative Harvest ETF
In my earlier columns about speculating on Reefer Madness, aka marijuana investing of the medical variety, I emphasized one main idea. Namely, that the safest way to get into this quite new, quite volatile investment sector was via the largest and most dominant sector ETF. That’s the ETFMG Alternative Harvest ETF. (Say that again 10x in a row.) The way too clever trading symbol for this ETF is, you guessed it, MJ.
Marijuana stocks even today are essentially either penny stocks or former penny stocks that have graduated to under $10 a share stocks. They are all speculative and nearly all of them are Canadian companies, since the legality of growing even medical marijuana in the US can vary widely from jurisdiction to jurisdiction. And pretty much no one knows how to really evaluate them as investments.
That’s why, should you want to gamble with a bit of that mad money (not real investment money), MJ might be your best bet for getting acquainted with Reefer Madness, Wall Street style. That’s because this ETF carries in its already substantial portfolio, a couple of major tobacco stocks along with one agricultural stock. We’re talking about Altria (symbol: MO, which still stands for Philip Morris, et. al.), and Scotts Miracle Grow (SMG). These old vets actually help stabilize this ETF. Or at least make it noticeably more stable than all those marijuana stocks.
Why tobacco and fertilizer stocks in this ETF?
“Sacrilege!” you say? Nope. With their tobacco business constantly under fire, the world’s tobacco companies are looking to move into the marijuana patch by increments. And to some extent already are.
Meanwhile, the guys who make the wonder-stuff that helps your inorganic tomato garden to flourish, Scotts Miracle Grow, have for quite some time been involved in the business of supplying racks, gro-lights and other apparatus maryjane growers need to gain commercial scale. Bet you didn’t know that.
Bottom line: MJ is still highly speculative. But given the presence of some big, old-line, time-tested major allied companies in its portfolio, this ETF has a lot more stability, relatively speaking, than individual marijuana stocks. It’s the safest one of many wild bets you can take in pursuit of Wall Street Reefer Madness.
Another spec idea I have contemplated recently involves picking up a couple hundred shares of an up-and-coming Canadian medical marijuana company Aurora Cannabis, Inc. (ACB). It trades stateside on the NYSE. It got some wind in its sails this week when it bought into and merged into another respected cannabis company, again Canadian, as are most of these treacherous but pioneering companies and stocks.
Aurora shares IPO’d last summer and promptly soared to ridiculous heights, only to come back down to earth with a dull thud. However, this is a real company, and it appears to be flirting with actual earnings. Its chart is bullish, and it broke resistance early this month, holding onto a rising 200-day moving average, a concept we discussed at some length in one of our columns earlier this week.
Aurora is also represented in the portfolio of MJ, the “Alternative Harvest” ETF. I hold some of these shares in our biggest portfolio. But again, like XLC, I’ve had iffy luck with this volatile ETF. It’s hard to get a handle on where it’s going to move next. Just like most of the stocks in its portfolio. Investing in this one involves kicking your investment Reefer Madness up a notch. Or two.
Individual marijuana stocks: Highly, highly speculative. But should we toke up?
In general, the marijuana stocks themselves are even trickier and more volatile still. So MJ is probably still the safer way to go if you want to enter the marijuana patch as a speculative investor. Just remember: this area is new and highly speculative, so it remains 50-50 whether you win or lose. It’s better to gamble in this area with dollars you can afford to lose (like when you’re in Vegas). Otherwise, you might mis-time an investment here and promptly get killed. Portfolio wise.
Personally, I don’t think maryjane should ever get fully legalized for recreational purposes. That said, though, I’ll concede it does appear to have some valid medical uses.
For that matter, I hate cigarette smoking, too. But it’s a legal product and stocks in this sector pay a high, reliable dividend. That’s why I jump in and out of tobacco stocks from time to time when I’m looking for a stable port in a market storm. The tobacco stocks, like the alcohol stocks — sin companies — are particularly good for your portfolio during a recession, when smoking goes up, for some strange reason. Dividend yields are high and prices tend to be relatively stable in hard times.
Lesson: In general, if you really want to have a chance to make money in the stock market, leave your moral posturing at the door. If you’re squeamish about too many businesses in our capitalist economy, you’d better stay out of active investing. You’ll put many good stocks off limits, which is not the way to make money. Great investors tend to be amoral, at least when it comes to stock picking.
BTW: First learn about businesses before you voice an opinion on an opportunity. Or buy a stock.
Example: Just look at how AOC misread things last month and managed to drive Amazon, millions of investment dollars, and at least 25,000 high paying jobs elsewhere. This invincibly ignorant Pied Piper of phony socialism is backpedaling now. This after robbing her Congressional district’s un- or under-employed constituents of opportunities they might have once only dreamed of. Again, if you’re a left (or right) wing ideologue who confuses investment decisions with empty virtue signaling, go play somewhere else. Mr. Market doesn’t want you. Thinking adults don’t want you either.
And note to millennials considering investing in the stock market. Forget the anti-capitalist propaganda your professors jammed down your throats. Read some books on investing. Learn what you should have learned in college but didn’t, even though you’re still $100K in hock for wasted tuition and fees. That in itself is better than wasting even more money on a graduate degree. (I know. I have three degrees.)
As for this veteran investor… I may pick up some shares of Aurora Cannabis anyway today when everything is trending down. Which could make it a good time to buy. I don’t particularly love the developing Reefer Madness sector, nor do I trust it. But the way things are going these days, it might – might – be the next big investment idea. And no one ever got rich by avoiding such ideas, as speculative and, perhaps, morally questionable as they might be. Amoral investing is the way to go. If you manage to get rich doing this, then you can put your fortune to work helping others. Without robbing the middle class to make yourself feel good.
And, oh, yeah… Have fun. After all, smoking a good joint – for medical purposes, of course – will turn out to be the best way yo deal with the huge squadron of flying a-holes we elected to Congress in 2018.
— Headline image: Promo poster and still frame from “Reefer Madness,” originally released in 1936.
Images via Wikipedia entry on the film are out of copyright according to statutes. Composite by the columnist.