Why We Don’t Invest Pot Stocks

John Maxfield : I hate to burst anyone’s bubble that’s high on marijuana stocks, but the reality is that I literally can’t think of a worse industry to invest in right now. Many of the companies have no revenue, are only tangentially related to the pot industry (and thus could very well not even participate in the industry’s seemingly inevitable growth), and are led by individuals with less-than-questionable integrity and little experience running a business, much less a publicly traded corporation.

It isn’t often, for instance, that FINRA urges prospective investors in a specific industry to check the Federal Bureau of Prisons Inmate Locator to determine if a company is being run by someone who has served time in federal prison. Why would it do so? According to the industry watchdog’s press release : “the CEO of one thinly traded, yet heavily touted, company that purports to be in the medical marijuana business spent nine years in prison for operating one of the largest drug smuggling operations in U.S. history.

The former CEO of a similar company was recently indicted for his role in a multi-million dollar mortgage-based Ponzi scheme.” It’s for these reasons and others that multiple self-proclaimed marijuana stocks have seen trading in their shares suspended over the last two years.

To share just one example, trading in GrowLife was suspended by the SEC earlier this year due to concerns “about the accuracy and adequacy of information in the marketplace and potentially manipulative transactions in [the company’s] common stock.” Jordan Wathen : The marijuana industry may grow 10-fold in the next few years, but that doesn’t mean it will necessarily result in riches for marijuana stock investors.

Rarely does the growth of an industry create a proportionately large explosion in the wealth of its investors. In a familiar example to Warren Buffett followers, I’d suggest that everyone acquaint themselves with the list of failed automotive manufacturers.

To read more, visit http://www.nasdaq.com/article/why-we-dont-buy-marijuana-stocks-cm414538

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