Last year was a historic one for marijuana legalization, and a boffo year for marijuana stocks. Most marijuana investors enjoyed massive gains in 2016. A number of smaller, over-the-counter marijuana companies even registered gains of more than 100% on the year.
Unfortunately, what was a landmark election for marijuana in November could end up being a bittersweet victory.
For one, medical and/or recreational marijuana won legalization votes in eight out of the nine states it was on the ballot in November. The most noteworthy accomplishment for marijuana stocks on Election Day was California’s vote to legalize recreational marijuana use. While that would seem like a boon for marijuana investors, legalized marijuana is actually a headwind for a number of related companies because easier personal access to cannabis hurts their causes.
Of course, the flip side is that Donald Trump’s surprising victory in the election may have derailed the marijuana movement. Trump quickly appointed Alabama senator Jeff Sessions as attorney general — a move that probably squashes any hope of federal marijuana legalization in the near future.
The future is less certain than it seemed. For those and other reasons, investors should dump or avoid these three big-name marijuana stocks. At least for the time being.
Marijuana Stocks To Sell: GW Pharmaceuticals (GWPH)
GW Pharmaceuticals PLC- ADR (NASDAQ:GWPH) is the golden boy of U.S. marijuana stocks. That’s because it’s one of just a few marijuana stocks listed on a major American stock exchange.
Also, GWPH doesn’t need U.S. federal marijuana legalization as long as it gains FDA approval for its drugs, so its future seems far less uncertain than other marijuana stocks.
GW Pharma recently announced positive Phase 3 data on Epidiolex for treatment of Dravet syndrome — a rare brain dysfunction. The news sent GWPH stock soaring 63% in 2016, and investors are hoping that momentum carries over into 2017.
The only problem for shareholders is that the company seemingly has run out of positive catalysts for the time being. GWPH’s Epidiolex story is right on track. However, the company will submit the new drug application (NDA) for Epidiolex in the first half of 2017 … and after that submission, GWPH shareholders might have to wait until the end of 2017 for the next piece of good news.
Without a reason to buy, investors and traders might take some of their profits off the table, especially in the first few months of the year.
Marijuana Stocks To Sell: Insys Therapeutics (INSY)
Insys Therapeutics Inc (NASDAQ:INSY) shareholders won’t be taking profits in 2017, because there really aren’t many profits to take. While the rest of the marijuana industry was on fire in 2016, INSY stock plummeted more than 65%.
The reason for the decline is partially because INSY stock always ends up in articles (like this one) about marijuana stocks even though it’s not really a marijuana company. Sure, INSY is planning on launching a synthetic THC product (THC is the psychoactive ingredient in marijuana). But the company’s cash cow is its deadly prescription opioid painkiller Subsys. Subsys is currently responsible for the vast majority of the company’s income.
Insys is an opioid company that dabbles in cannabis rather than a pure marijuana stock In fact INSY donated a half-million dollars to the anti-legalization movement in Arizona; legalized medical marijuana is a huge threat to opioid painkiller companies like Insys.
One more reason to dump this stock: The U.S. Department of Justice in December charged former INSY executives with bribery and racketeering.
Marijuana investing is risky enough. Avoid this mess.
Marijuana Stocks To Sell: Medical Marijuana Inc (MJNA)
As bad as things may be at Insys, they could definitely be worse. While INSY has former executives getting busted by the feds, at least its core business is theoretically legal.
Medical Marijuana Inc (OTCMKTS:MJNA) sells cannabidiol (CBD) oil that the company extracts from hemp. The California company has always claimed this process was legal in the U.S.
Unfortunately, the Drug Enforcement Administration (DEA) has thrown a wrench into things.
The DEA updated the Federal Register with a new drug code for marijuana extracts. While a DEA spokesperson said the update “did not have anything to do with rescheduling CBD or anything at all to do with hemp,” industry insiders feel differently.
“The DEA is basically now saying that this is illegal, what they’re doing, so (…) if this continues to roll out the way it looks this company could face some big problems,” New Cannabis Ventures founder Alan Brochstein recently said of MJNA stock.
To make matters worse, Medical Marijuana hasn’t done much to reassure skeptical investors. The company has more than 3 billion shares that trade at just 18 cents each, and it’s being weighed down by a lot of bad debt.
Sales are in decline, its business model is apparently illegal and the president-elect just nominated an outspoken anti-marijuana advocate as attorney general. MJNA isn’t doomed, but holding the stock doesn’t sound like a grand idea, either.
As of this writing, Wayne Duggan did not hold a position in any of the aforementioned securities.