In just a couple of short years pot stocks have grown from something unheard of from penny stocks on alternative exchanges, to a high-volume, multi-billion dollar market cap headline-making sector.
The explosion of Canada based cannabis stocks on the market has been quick and frenzied, but there is still room for investors to cash in on refer madness.
Refer Madness: Tilray Overbought Compared to Competitors
American companies still face headwinds in the industry as Marijuana has maintained its Schedule-1 status as an illegal drug federally.
While it’s legal in many states, the inability for companies to use a federally backed bank has severely impacted scalability, and given Canadian companies like Tilray, Aurora Cannabis, and Canopy Growth Corp. a first-to-market advantage.
Pot stock Tilray, Inc. is definitely the current hype leader. Since the company’s IPO in July, Tilray’s stock price has skyrocketed by more than 500 percent and has commanded headlines over the past week.
While the Canada based company dropped by around 30 percent in Friday’s trading session, there is no denying that Wall Street and retail investors alike are flocking to pot stocks, and Tilray has somehow ended up center stage.
Tilray’s recent sell-off came as a result of a push by a Florida Republican to favor U.S.-based cannabis companies in upcoming clinical trials.
Investors should be aware that while the 30 percent drop improves the company’s entry point, Tilray is overbought according to most analysts, and there are a number of larger companies with more attractive price points.
If an investor is looking to cash in on the Tilray hype, setting a stop-loss on the stock or hedging their investment in some other way would be prudent.
Aurora Cannabis and Canopy Growth Corp.
One thing that is unclear in the recent pot stock rally is why Tilray has been soaring while larger companies like Aurora Cannabis and Canopy Growth Corp. have been lagging behind.
Canopy Growth was the first cannabis company to be listed on the New York Stock Exchange.
The surge in Tilray’s ticker price was likely a result of the company’s limited number of total shares, according to Canopy CEO Bruce Linton, who says Tilray grows about 5 percent the amount of pot as Canopy.
“I don’t think it was about the merits of that company, I think it got technically weird,” said Linton on CNBC.
According to Linton, the nature of the cannabis industry, especially after legalization is innovation as well.
“Cannabis is kind of this platform where you can create IP, you can run medical trials, you can file patents without any hesitation,” said Linton.
“I think there’s an opportunity to create things that don’t exist now so I think that when I come back each quarter there will be new things to talk about because we’ll have invented them.”
According to CNBC Mad Money host Jim Cramer, Canopy is the stock to buy.