Five things you should know about marijuana stocks before investing!

Happy Sunday folks! As a Canadian who lives in California, it is impossible for me not to think of marijuana stocks! Canada is on the verge of fully legalizing marijuana, and California just made recreational weed legal. No wonder why several of the most active members of our Intelligent Investors community have been researching and discussing these stocks for quite a while. Based on those detailed conversations, there are five things you need to know before picking up any cannabis stock:

Pros:

1. Medical marijuana market is growing by 17% per year. That means it does not require the legalization of recreational consumption to be an organically growing market (pun intended). Additionally, legalization is expected to continue and increase the market growth rate from 17% to ~29% per year in the next several years. 
2. Major consumer brands are investing their dollars in the industry (for example, Constellation brands took up a 10% stake in Canopy Growth). This leads to more stability in the industry. 

Cons:

1. Many of the players need cash to grow their production capacity. The money is now coming through issuance of significant amount of convertible notes which means a substantial increase in the number of outstanding shares. What's this financial mumbo-jumbo, you ask? It merely means growth is coming at a cost. The more outstanding shares out there, the lower value per share for existing shareholders. 
2. Even though many of the larger players do not need the recreational legalization to survive, any delays in legalization in the Canadian and other markets will drastically impact the price. Expect several months of extreme volatility. 
3. We are yet to see a profitable marijuana producer. In the end, weed is an agricultural product and agriculture is a low-margin business. Even at their best, the key players will be low-margin businesses that are growing rapidly. Don't expect dividends in this sector anytime soon.

Now, let's take a look at the largest producer and arguably one of the best-run cannabis companies in Canada. I recently picked up this stock for StockCard.io's league of the 10Xers portfolio, and I wanted to share its Stock Card with you:

​Canopy Growth operates in the legal marijuana market, and it is one of the largest publicly traded producers of dried cannabis in the world. In the last round of review, we were hesitant to jump in before legalization legislation comes to complete fruition. However, we have kept a close eye on this stock. Even without recreational marijuana legalization, the company is poised for growth. It has enough cash to operate for a few years without the need for additional funding. With the company's recent progress and the potential for growth, we see a small spot for the company in our real-money portfolio of the league of 10Xer stocks. Visit Canopy Growth's Stock Card to get to know the company better.

Other Stocks on our Radar:

Thanks, Fabien Lamasion, Yasha B., Gauri Jog, Aditya Bhave, Sahil G., Venkata R. Munnamgi, and Mark Bernberg from our intelligent investors' community for this week's Stock Card requests. Take a look at these Stock Cards by clicking on their logo:

That's it for this edition of Stock Card Weekly! They say if you forward this email to a friend it makes Warren Buffett smile a bit! Make him laugh by forwarding it to 10 friends!

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