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Is Cannabis A Solid Investment, The Next Big Bubble, Or Both?


Investors are into cannabis.

Investors are falling in and out of love with the marijuana business, sending stock prices of cannabis-related companies bouncing like a basketball.

As legalized cannabis has taken hold in states including Colorado, Washington and now California,  and with legalization in Canada, companies related to the business have become attractive to investors.

“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.”

In 2018, the Nasdaq and the New York Stock exchange both saw Canadian cannabis-related companies listed, with the public offerings of Canopy Growth and Cronos. And CNBC reports that investors have been quite enamored of the two companies. Canopy Growth shares have risen about 65 percent so far this year, while Cronos is up more than 115 percent.

“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,” wealth advisor Pepper told CNBC.

She says she expects particularly big things for cannabis when it comes to medicine.

“The medical applications for cannabis are staggering. The research is being done and I really think this is next huge growth area,” she says.

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.

He writes:

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.

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