If you are looking for the best Canadian cannabis penny stocks to buy, then here is what you need to know
Investor interest in any new area attracts penny stock spammers—and cannabis stocks are no exception.
The recent rebound in cannabis stocks could bring about a new wave of these penny promotions. That could lead investors to buy overvalued stocks—but even worse, it can see them fall victim to wildly-speculative “Pot o’ Gold” penny stock promotions as they target the best Canadian cannabis penny stocks.
Ultimately, cannabis pennies should only be a very small part of any diversified portfolio, if that. Indeed, you should only buy them with money you can afford to lose.
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Overall, we advise staying out of penny stock promotions. They attract the wrong kind of people. Stock promotion is a take-the-money-and-run type of business. Most successful entrepreneurs value their reputations, and want to build a profitable, sustainable business that can pay off for investors. So they generally go into some other line of work, and stay out of stock promotions.
These days, it’s faster and easier than ever to launch a stock promotion, thanks to the Internet. In fact, one recent “penny pot” investing stock scam we saw almost seems like a business-school case study on launching online frauds. To avoid being taken in, it pays to read more, and to think before you invest.
In general, penny stocks, including even the best Canadian cannabis penny stocks, have lower trading volumes, or liquidity, and this lack of liquidity means it may be more difficult to sell a stock when you want to. They also suffer from large price fluctuations, so any bit of news will cause a penny stock’s price to rise or fall.
Small cannabis firms already face high barriers
The speculative appeal of Canadian cannabis stocks continues to attract investors looking for a “ground-floor opportunity.” However, the pioneers in an industry are not always the ones who survive.
Small cannabis producers have to overcome all the usual obstacles that small and start-up companies face. As well, there are low barriers to entry for new cannabis producers. If demand grows large and profitable enough, major agricultural and drug companies, as well as tobacco firms, are likely to enter the field and take sales away from small growers.
Bonus tip: Here’s the best way for conservative investors to invest in cannabis
Which cannabis producers’ stocks will move up on speculative momentum, and which will crash? That’s very difficult to predict—given the industry’s low barriers to entry, and uncertain future regulation.
We think a far better way for conservative investors to profit is with firms that will profit no matter which producers thrive. At the same time, they already have a solid base of other business, sound prospects—and the added appeal of a sustainable dividend. Here are five such stocks for investors:
Scotts Miracle-Gro Company (a worthwhile hold for most investor portfolios)
Altria Group (a worthwhile hold for most investor portfolios.)
Loblaw Cos. (this company is a buy)
PepsiCo (a worthwhile hold)
Bonus tip #2: Follow these tips to profit from penny stock investing overall
Avoid penny stocks that trade at unsustainably high prices because of broker hype or investor mania about the underlying commodity.
Look out for acquisitions. Acquisitions can bring “time-bomb” risk. Companies sometimes grow quickly by buying other companies. But it may also be the case that those selling the companies may simply want to bail out of a losing situation.
Look for earnings or cash flow. A perpetual money loser will eventually go broke, no matter how impressive its technology. But if it makes even a little money, it can stay in business and perhaps reap the bonanza of a new product.
Spread your penny stocks out across different market segments. When making a list of penny stocks, we recommend investing in a range of markets. This includes software, biotech, technology, mineral exploration and so on.
Apply our sell-half rule. Selling half your holdings after you double your investment is a good strategy for any high-risk investment, but especially so for penny stocks. This can give you a clearer perspective on what to do with the other half of your investment. After all, if you are too slow to sell speculative stuff, your profits and even your principal can evaporate all too quickly.
What stocks would you consider to be the best Canadian cannabis penny stocks available?
What is your impression of cannabis penny stocks? Do you think they may offer a ground-floor opportunity, or are they just a bubble waiting to pop?
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