Marijuana stocks were all the rage at the start of 2014. Thanks to legalization in several states and a Gallup poll that showed a majority of Americans support legalizing cannabis, marijuana stocks such as Hemp (HEMP), Cannabis Science (CBIS) and Medical Marijuana (MJNA) simply took off.
And while the furor over marijuana stocks has admittedly cooled off, some of these players are still sitting on big-time profits.
Take HEMP stock, which is down over 80% from its February peak but still up 45% on the year.
So now that the bubble has burst in marijuana stocks and these companies have fallen back to earth, is it worth considering buying these players at lower prices?
One ambitious hedge fund manager certainly thinks so.
Marijuana Stocks as Hedge Fund Fodder
FINalternatives, a publication for the hedge fund industry, recently profiled a Las Vegas-based money manager who has aims of creating a cannabis-focused hedge fund.
The payoff for investors, according to Finalternatives, is the following opportunity:
“According to market research from The ArcView Group, the U.S. legal marijuana market was worth $1.53 billion in 2013 and is expected to grow 68% to $2.57 billion in 2014. Currently, 20 states plus D.C. allow medical marijuana use and two—Colorado and Washington—allow ‘adult-use’ by individuals over the age of 21. ArcView predicts 14 additional states will adopt adult-use laws within the next five years, including California, which will vote on the issue in 2016—and which represents a $980 million marijuana market even without adult-use laws.”
Marijuana stocks that are publicly traded are only the tip of the iceberg, and a hedge fund could provide access to private companies and other businesses investors normally couldn’t share in.
Crazier ideas are out there in both the hedge fund space or among exotic ETFs.
So if you’re thinking of investing in marijuana stocks, keep watching the fund industry.
Frankly, many of the microcap marijuana stocks out there are still driven largely by sentiment and low-volume moves, so a cannabis fund to play the space could be very useful to investors.
Jeff Reeves is the editor of InvestorPlace.com and the author of The Frugal Investor’s Guide to Finding Great Stocks. As of this writing, he did not hold a position in any of the aforementioned securities. Write him at firstname.lastname@example.org or follow him on Twitter via @JeffReevesIP.