Over the past week, marijuana stocks have been particularly strong, with the strongest being the four leading U.S. multi-state operators that we own—and that means it’s time for another brief update on strategy.
Last week I wrote, “If you’re an aggressive investor keeping a close eye on your stocks, feel free to load up on the strongest ones and ride them as long as they go up—while cutting losses short. A concentrated portfolio in the hottest stocks can make big money fast (but sometimes lose it fast, too).”
Short term, loading up has worked great. Those four stocks, along with GrowGeneration (GRWG), which is also hitting new highs, are clearly benefitting from the same effect that has buoyed the stocks of Apple, Amazon, Facebook and Google; people like to own the most popular names.
And long term, I still expect that these companies will be among the leaders of the industry years from now, so the strategy of buying here appears sound.
However, there will be corrections! And the higher these stocks run in the current advance, the greater the odds that such a correction will turn the recent buyers into quick losers.
Thus, if the prospect of losing some of your gains is unappetizing, by all means feel free to take some partial profits here, or at least place some stops.
On the other hand, if you still feel underinvested in marijuana stocks, my advice from last week still stands. “Take your time. Wait for lower-risk entry points. Wade in slowly. The game is still in its early innings.”
Stocks at attractive short-term entry points today do not include those leading U.S. producers. Instead, if you’re looking to buy, I recommend you look at some of the Canadians, like CGC and CRON.
For our portfolio, which is fully invested, I’m standing pat today, but I will be keeping a close eye on all these stocks, as well as the quarterly reports that will coming in the weeks ahead. (APHA and TPB have already reported, but the rest are still to come, with IIPR after the close today.)