Pot Stocks: Sooner Or Later We'll Have To Talk
Charles Sizemore | May 14, 2013 09:55AM ET
I’ve been a big believer in vice investing -- and particularly tobacco stock investing -- for a long time. I turned PHOT ), a leading seller of hydroponic equipment?
I’m betting the answer is not too many. At this stage in the game, there is no real brand recognition to speak of.
The Financials
What about the other criteria? Are these companies at least financially sound? Do they reward shareholders via dividends and share buybacks?
Not exactly. All three companies are high-risk penny stocks and none pays a dividend. Of the three, Medical Marijuana, Inc., the “blue chip” of the group, has the healthiest balance sheet, but you’re talking about a company that generated only $5 million in revenue last quarter.
And price? Medical Marijuana, Inc. trades for 14 times book value and 24 times sales. To pay those prices for any stock…well, let’s just say you’d have to be heavily under the influence of the company’s products.
Target Price
At time of writing, Medical Marijuana, Inc., Cannabis Science and Growlife trade for $0.17, $0.05 and $0.04 per share, respectively. But a young analyst I interviewed on the matter told me he had a price target of $4.20 on all three.
I think there was a joke in there somewhere at my expense.
Bottom Line
while marijuana stocks may indeed be vice investments, they have none of the qualities that have helped tobacco generate such fantastic returns over the past 50 years. Treat them as a risky speculation and nothing more.
Sizemore Capital has no positions in any stock mentioned.
This article first appeared on InvestorPlace.
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