No. of Recommendations: 2
Marijuana remains illegal at the US federal level, and as such, any business dealing in the area of cannabis production would have to operate on an intrastate basis as crossing state lines would make it difficult for federal authorities turn a blind eye as they have so far in states where it is legal. For that matter, while medical marijuana is legal to some degree in a number of states, recreational use remains illegal most all states, further limiting the customer base.

On top of that, financial institutions face criminal entanglements should they provide any form of banking services to marijuana-dealing companies, whether it be payment processing, checking and payroll services or credit and lending services. In fact, they could face forfeiture of assets. So understandably, companies dealing in marijuana production and distribution do so without the financial support of the regulated financial industry. This necessarily cuts them off from the resources most companies need and utilize to grow and expand their businesses.

Investing in such companies, until federal law catches up to state law and companies are able to produce the kind of investment gains that would be worthy of a portfolio, remains highly risky and speculative. And the current administration has already indicated it will not continue the previous administration’s “blind eye” policy and may actively begin targeting individuals in states that have legalized medical and recreational marijuana.

Now recreational marijuana has become become legal in Canada but I am not familiar with Canadian investing and cannot speak to the opportunities there. There is a new TMF service for Canadian Fools and another for US Fools to invest (mostly) in the Canadian market. But bear in mind that the market for any Canadian companies in this industry would not necessarily have have access to the American market, which also could limit their growth opportunities.

It's actually worse than that. The United States has stated that Canadians who admit to having smoked or consumed marijuana or any cannabis product will be permanently denied entry to the USA. For Americans, admitting to having consumed cannabis products in Canada could lead to arrest. The US Government considers even investing in a Canadian companies involved in the cannabis industry as participating in illegal activities, which could potentially subject them to prosecution and asset seizure and forfeiture. Now, this bluster has not been tested in court yet, but lying about your activities or investments to border officials would also be a violation of law.

That said, if you still want to invest in Canadian marijuana companies, I would wait at least a year for the businesses to get four quarters worth of earnings results to see how these companies operate in this new marijuana market. Some may thrive and some may not survive or be consumed by a competitor. You won't get reasonable Year-over-Year comparisons until the calendar 4th quarter 2019.

It's not about what you think of medical or recreational marijuana. It's much more practical than that. Treat marijuana companies like any other investment opportunity out there. If it wasn't marijuana, would you invest in a company that is so limited in its ability to grow? Without growth, your investment isn't going anywhere. So ask yourself, where's the growth going to come from?

Fuskie
Who would not touch this market as an investment until there is a demonstrable and proven path for sustained growth and profitability...

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Ticker Guide for The Walt Disney Company (DIS), SodaStream (SODA), Live Nation (LYV), CME Group (CME), Mongo DB (MDB)
Disclaimer: This post is non-professional and should not be construed as direct, individual or accurate advice
Disclosure: May own shares of some, many or all of the companies mentioned in this post (tinyurl.com/FuskieDisclosure)
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