MARIJUANA STOCKS SECTOR ANALYSIS - CANOPY GROWTH STOCK
Channel: Value Investing with Sven Carlin, Ph.D.
Date: 2018-04-19

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We are going to look into the economics of the cannabis industry.
The stock of the day for analysis is Canopy Growth.
We finish with what to do as a cannabis investor.

When the market is overvalued as it is now and the probabilities of a recession hitting the economy soon are high one might look for alternative investments to see whether there are some better risk reward opportunities or at least ways to take advantage of the trend. Two such hot investment trends are marijuana stocks and lithium miners that we discussed yesterday. Today I’ll touch on the marijuana stocks to see whether those will end up like a fad that will burn investors or there is some actual sector earning capacity. 
The things to look sector wise are demand and supply, production costs, potential margins and the inevitable investing trend and momentum that has been created. The sector’s revenue has to also be compared with the total market cap of the sector and we have to look at whether there are some producers that have a business moat of some kind to differentiate between investments and speculations. 
I am going to discuss the sector by analyzing the largest player on the block, Canopy Growth (TSE: WEED) but let’s first look at the sector.
The cannabis industry
The exuberance surrounding the industry started in 2017 when the legalization of cannabis is Canada became a fact and stocks surged on the news. 
However, since the start of this year there has been an increase in volatility and marijuana stocks haven’t go up. Let’s dig deeper to see whether it is a trend or fad that will burn out like a joint.
Canopy expects the weed market to be from $5 to $10 billion soon