Medical and recreational cannabis use has been legalized in a growing number of U.S. states and on a national level in Canada, fueling a burgeoning legal cannabis industry in recent years. Cannabis stocks are now a prime focus for investors seeking potentially explosive sales and stock growth. But there are certain considerations associated with marijuana stocks that investors should keep in mind.
To begin with, cannabis stocks face higher-than-normal risk and volatility due to a long list of factors. Many publicly traded cannabis companies are young, unproven enterprises that face a complicated, fast-changing market that includes different laws across many local, state, and regional jurisdictions. Also, cannabis use is still illegal at the U.S. federal level. On April 1, 2022, the U.S. House of Representatives voted to decriminalize cannabis. The approval is regarded by many as a key step toward consensus on the issue over the long term, even though the proposal is not expected to pass in the Senate.
The challenges are particularly great for investors when it comes to marijuana penny stocks. Investors should be especially cautious and perform more than their usual due diligence when investing in these companies, which include up-and-coming names such as Cansortium Inc. and Goodness Growth Holdings.
Marijuana stocks, represented by the ETFMG Alternative Harvest ETF (MJ), an exchange-traded fund, have dramatically underperformed the broader market. MJ has provided a total return of -54.1% over the past 12 months, well behind the Russell 1000’s total return of 13.3%. MJ targets a broad assortment of cannabis industry stocks, including penny stocks.
Here are the top three marijuana penny stocks with the best value, the fastest growth, and the best performance. The market performance numbers above and all statistics in the tables below are as of April 1, 2021.
These are the marijuana penny stocks with the lowest 12-month trailing price-to-sales (P/S) ratio. For companies in early stages of development or industries suffering from major shocks,…
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