Does Investing in the Cannabis Industry Make You An Unethical B*stard?

Bloomberg says:

There’s a buzz in Australia’s stock market.

Shares of companies involved in the cultivation, production and research of medicinal marijuana have on average soared more than 130 percent in Sydney this year. That’s six times higher than their peers in the US and Canada. The surge was sparked by Australia easing restrictions on imports of cannabis to treat illnesses from epilepsy to cancer.

It’s no wonder there has been such a surge in interest in Sam Volkering’s recent research reports into the sector.

Sam is bullish on medicinal marijuana stocks, and he’s not the only one. More from Bloomberg:

“The market is excited by the potential upside it could bring,” said Niv Dagan, Melbourne-based executive director at Peak Asset Management. Dagan has a very small chunk of his more than A$100 million fund exposed to Australian pot stocks. “The key risk we see is obviously regulatory risk,” he said by phone.

You bet it is. It wouldn’t take much for the government to let the air out of the euphoria by indicating a harder line to legalisation.

But when it comes to speculation like this, you just have to weigh up the potential rewards with the potential gains.

This isn’t the market to invest your life savings. But it may be the market to stick a small part of your stock investments in an effort to bag a multi-digit-percentage gain.

That’s why Sam has been all over the sector. He’s calling it the ‘Marijuana Mania’. It is a mania, and we’re not convinced the mania will end anytime soon. Details here.

Pot winners

On the subject of ‘Marijuana Mania’, check out this year-to-date chart from Bloomberg.


Source: Bloomberg
Click to enlarge

The Aussie-listed cannabis sector is up nearly 140% this year. That significantly outpaces the 20% gain for the rest of the world’s cannabis stocks.

Of course, it’s fair to note that US cannabis stocks saw a terrific run in 2016 leading up to the November elections — when legalisation of marijuana was on the ballot in several states.

An unethical b*stard?

More from Bloomberg:

There are similarities to the dot-com boom where only a couple of Australian medicinal cannabis companies will become giants, John Athanasiou, chief executive officer of brokerage Red Leaf Securities told Bloomberg TV Friday.

However, Athanasiou went on to explain that the sector has a bright future:

What politician in their right mind will be that heartless to reverse this legislation which allows a child who’s suffering from multiple diseases not to use medical marijuana.

Politicians do crazy things all the time, so we wouldn’t put it past them.

To us, the legalisation of cannabis (or marijuana, if you prefer) is a no-brainer. For a start: What government thinks it should have the right to ban a naturally-occurring plant?

It just doesn’t make sense. It’s about as illogical as a government deciding to ban stinging nettles because they cause harm.

In fact, we’d probably go as far to say that, comparably, we’d much rather ‘suffer’ the effects of cannabis than we would stinging nettles…they hurt.

Not everyone agrees with our decision to advocate investing in this sector. Subscriber Rik writes:

This drug will effectively destroy millions of lives.

If you think for one moment making money out of this treachery is a good thing then you are as evil and un-ethical as the bastards who have sucked the public into thinking drugging a nation is a good thing by you condoning it for the sake of making a buck… Shame on you!

Two things…

There is the argument that supposedly ‘weak’ drugs like cannabis are just the thin end of the wedge.

That once someone tries one drug, it will lead them on to other, perhaps much more harmful, drugs.

That may or may not be true. However, writing from a position of zero knowledge on the matter, we would be more inclined to think that those who end up seeking ‘harder’ drugs do so for other reasons.

It’s not that their partaking in cannabis consumption has ‘warmed them up’ to the idea of harder drug addiction; it’s that other events in their lives contribute to it.

That could be mental, financial, personal, physical, or any of a thousand other reasons why someone seeks the thrill of a harder drug.

For this reason, we don’t buy that theory.

As for being unethical…it’s an interesting point. However, we’re not certain that, from an investment perspective, it’s our role to consider ethics.

As financial advisers, it’s our role to give what we believe is the best financial advice. And, as we don’t handle money or execute trades for people, you, as an individual investor, can do as you please with the advice we give.

If you didn’t like our company’s recommendations relating to coal seam gas or shale gas plays from 2008 through to 2014, you didn’t have to follow them.

You would have missed big gains, but that’s fine. There are plenty of investments out there.

That’s the great thing. You get to choose. It’s not the same as when you own a managed fund, and then, one day, you find out it owns a stack of tobacco stocks or munitions companies.

You have to decide whether to stick with the fund, or go through the rigmarole of researching and finding a new fund.

Or, if the fund manager decides to get out of ‘unethical’ investments, there’s the cost this involves. Perhaps the selling pressure will result in them selling stocks at a lower price.

Not to mention the transaction costs. And what if the new ‘ethical’ investments don’t perform as well as the sold ‘unethical’ investments?

If you don’t have the choice to make that decision, naturally, it’s out of your hands. You’re just left with the consequences — and those consequences may not always be to your benefit.

That’s especially so if your concern is having enough money saved for retirement, rather than worrying about whether companies choose to profit from people who make the free choice to smoke or gamble.

Anyway, that’s our take on the matter. As an investor and adviser, we just look for the best investment ideas. Right now, we figure one of the best speculative investment ideas is in the cannabis industry, hence our special report.

Cheers,

Kris Sayce,
Publisher, Money Morning

From the Port Phillip Publishing Library

Special Report:Marijuana Mania’ News.com.au is calling it Australia’s ‘next billion-dollar industry’. Our investigator calls it the biggest ‘legal drug deal’ in history… Don’t miss a cent of it.

This ground-breaking medical mega-trend has already spawned levels of wealth we haven’t seen since the tech boom of the early 2000s. Jaw-dropping stock gains like 1,380%, 1,102% and 13,627%! If you’ve got the guts — and a few coins in your pocket to play with — this mega-trend has the power to potentially nab you a ‘high-bagger’ gain of 1,233% by this time next year. But only if you act NOW… [More]


Money Morning is Australia’s most outspoken financial news service. Your Money Morning editorial team are not afraid to tell it like it is. From calling out politicians to taking on the housing industry, our aim is to cut through the hype and BS to help you make sense of the stories that make a difference to your wealth. Whether you agree with us or not, you’ll find our common-sense, thought provoking arguments well worth a read.

Money Morning Australia is published by Port Phillip Publishing, an independent financial publisher based in Melbourne, Australia. As an Australian financial services license holder we are subject to the regulations and laws of Corporations Act and Financial Services Act.


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