Some investors may view others moving towards a new investment idea as a “rush” and a great chance to cash in on a hot new industry.  The classic investor emotion of “fear of missing out” has yet again taken control of those looking to invest in the soon-to-be legalized cannabis industry.  The accelerated growth of these businesses has surely received the attention of the media, as well as many first-time investors.  Many of these companies have had their stock price move up a very long way in a very short period of time and this should make any investor tread carefully.

Although it can’t be denied there is some potential in this new industry, market capitalization for many of these companies is extremely over inflated as they do not have the revenues (or profits) to justify their valuations. There is a lot of speculation on how this new industry is going to work, and too many variables such as government regulations and the high number of companies trying to enter the industry for anyone to know how this will all pan out in the long run.  This certainly reminds us of the Internet bubble in the 2000-2002 time frame and essentially all serious successful investors are avoiding this industry at this time.  Nevertheless, this is a good time to take a moment to reflect on the difference between true investing and market speculation (ie. Gambling) and if you have any questions please don’t hesitate to contact us.