It is common practice for marijuana penny stock investors to overvalue their investments and to underestimate the complexity of the industry. This is one of the most common mistakes and most often leads to an extremely painful and expensive experience. While most marijuana penny stock investors will never experience trading losses of more than 50%, this is a serious concern.
The argument that marijuana penny stocks are a “sure thing” has been around for decades, yet those who have been following them have been relying on anecdotal evidence rather than actual facts. That all changed when the penny stock exchange started publishing weekly marijuana penny stock rankings, making it possible to see exactly why these stocks are falling short.
For a brief moment during the tail end of 2013, it seemed as though U.S. marijuana stocks were going to set a record for rising prices. The hype around Colorado and Washington legalizing marijuana was so huge that it seemed as though the U.S. government was going to change its position on the topic, and even though a 2014 ballot measure to legalize marijuana in California failed, the U.S. market for marijuana was set to explode.
What Can Marijuana Penny Stocks Expect in 2021?
Marijuana penny stocks were all the rage once upon a time. They were, after all, one of the most effective methods to achieve quick results.
Penny stocks are renowned for their propensity to fluctuate dramatically in response to even small market movements. In the marijuana sector, where seismic event after seismic event has occurred in the years after 2014, penny stocks have skyrocketed.
The issue today is whether marijuana penny stocks still have their enchantment. To put it another way, do they still have the potential to provide massive benefits in a short period of time?
Yes, but there is a stipulation.
What are the locations of the businesses?
First and foremost, it is very dependent on where marijuana penny stocks are appearing.
The market in the United States is still wide open. While certain marijuana businesses have proved to be more prominent than others (many of which I’ve written extensively about), the reality remains that there is still a large portion of the industry that has yet to be explored.
Forget about areas where marijuana is still illegal; even in states where it is legal, the market is underserved owing to banking limitations for marijuana businesses and limited access to capital from big institutions.
Keep in mind that California has the world’s biggest legal marijuana market (even if it isn’t legal nationally, but I’m not going to go into that right now).
To summarize, the California cannabis industry is legal for all intents and purposes, and there are many possibilities for investors to benefit from the state’s rapid development.
However, as previously stated, the absence of financial assistance for both storing cash and lending money has slowed the development of the legal marijuana industry in California.
Furthermore, California, like Canada, continues to have a thriving marijuana illicit market, which cuts into income that would otherwise go to legal marijuana businesses.
As customers shift from purchasing goods from illicit dealers to buying them from authorized shops, the criminal market for marijuana will become more vulnerable. However, the black market will continue to be a thorn in the side of legal marijuana businesses while the shift takes place.
Because of the limited market maturation process, new marijuana businesses (and future marijuana penny stocks) will be able to join markets and rise.
Furthermore, owing to a lack of institutional investment money accessible to U.S. marijuana businesses and the prohibition of Canadian marijuana companies from entering the U.S. market, tiny U.S. marijuana enterprises have a longer time to develop and flourish before being purchased.
Investors that own shares in the acquired business nearly always profit from acquisitions. Investing in the business making the purchase is a hit-or-miss proposition.
However, if smaller businesses are purchased before they can go public, individual investors will be excluded from the benefits of the acquisition announcement. Only angel investors, venture capitalists, and other industry insiders will profit from these transactions.
This is an issue that also affects Canada. Even if an intriguing new marijuana business emerged in Canada, many of the major rivals are so flush with cash that they would almost definitely try to buy it out, perhaps before the new company had a chance to launch an IPO.
On the other hand, established marijuana companies are more likely to grow globally and capitalize on new market possibilities.
Consider what would happen if the United States legalized marijuana on a federal level, followed by Germany very soon. Both nations have sizable marijuana stock markets with plenty of possibilities for investors. Getting as much exposure to both markets as possible may be a smart move.
However, marijuana penny stocks will almost likely lack the infrastructure, experience, and money to aggressively expand worldwide, despite the enthusiasm around the new markets becoming legalized.
In that case, bigger marijuana companies may easily outperform smaller marijuana penny stocks if they can take advantage of both market openings.
What Services Do the Businesses Offer?
The second factor to examine when it comes to marijuana penny stocks is the services provided by the business.
Do they have a unique product line? Is it possible that they’re going for a niche market that’s underserved yet lucrative? Do they have marijuana-growing techniques that enable them to sell at significantly greater margins or cheaper prices than their competitors?
To put it another way, is there anything special about the new penny marijuana stocks?
Because the cannabis market has so many established participants, it’s becoming more difficult for individual marijuana companies to stand out.
However, if a marijuana business can achieve this distinction by launching a new product, it will almost certainly become profitable. After all, the marijuana industry is one of the most profitable and unexplored industries on the planet. A pot market inventor might be a big financial opportunity.
Price of a Share
That begs the question: do marijuana penny stocks have a greater price cap than established, higher-priced pot companies?
Yes, to put it simply. Of course, going from $1.00 to $2.00 per share is simpler than going from $100.00 to $200.00 per share (if the prices are pegged to market cap, as they almost always are, to some extent).
Additionally, marijuana companies with lower share prices appeal to individual investors more. While there is no psychological difference between having one $100.00 share and holding 100 $1.00 shares, there is a psychological aversion to owning fewer high-priced shares compared to owning many more shares of a cheaper company.
From my opinion, both marijuana large-cap companies and marijuana penny stocks have potential.
Both may see exponential growth in the future years, depending on a variety of variables. The greatest approach to get exposure to all areas of the market is to diversify your portfolio, but it’s worth remembering that marijuana penny stocks are among the most volatile investments.
Penny stocks are the only way to get in on the marijuana business. If you are unfamiliar, these are stocks that are traded on the penny stock exchange. The main reason Penny stocks are so popular among the marijuana community is because they are one of the few legal ways to invest in the marijuana industry. Plus, these companies are fairly cheap, with most trading for less than $1.. Read more about top marijuana’s penny stocks 2018 and let us know what you think.
This article broadly covered the following related topics:
- marijuana penny stocks
- medical marijuana penny stocks
- marijuana penny stocks to buy
- how to buy marijuana penny stocks
- disadvantages of penny stocks