weed squeeze

Should Investors Be Careful About Diving Into Cannabis Stocks?

As if the short squeeze of recent weeks didn’t tire us out enough, now Reddit investors are targeting cannabis stocks.

Just when I thought I’d make it to the weekend without incident, the ‘WallStreetBets’ Reddit army rears its head again and drags me back into the trenches of pump n’ dump investing.

However, with GameStop and AMC becoming old news, cannabis stocks might be a more relaxing target.

Here we go again..?

You’ve probably seen it all by now, but here are the impressive Wednesday numbers:

  • Tilray: Up 50% (670% YTD).
  • Canopy Growth: Up 6% (110% YTD).
  • Aphria: Up 10% (280% YTD).
  • Aurora Cannabis: Up 20% (120% YTD). 

Big gains for an industry that has struggled to live up to its promise of consistent growth in recent years. However, rather than the same dangerous gambling that took place during the GameStop squeeze, there is actually a bull case for this behavior — if you’re not risk-averse. 

While this increased interest from retail investors may be somewhat related to pot stocks’ high short interest ratio, it is clear that many investors are also banking on government policy. With the Democratic Party now holding the White House and a majority in Congress, we could soon be looking at cannabis legalization on a federal level, which will, of course, only boost these stocks. 

However, investors today need to remember any lessons learned from last month’s short-squeeze. Like any investment, you should understand what you’re buying, and cannabis is a very niche industry with a number of intricacies and more complex business models. The investors who will get the most out of cannabis are the ones who do their due diligence and understand that it is a long-term play. 

If you wish to know more about this sector, check out this piece on our blog.

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MyWallSt operates a full disclosure policy. MyWallSt staff currently holds long positions in companies mentioned above. Read our full disclosure policy here

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