Would you add marijuana stocks to a client's portfolio?

Marijuana legalization is coming to Canada, and so are opportunities to invest in the sector. But are advisors on board?

Would you add marijuana stocks to a client's portfolio?
Mike Hayhoe
Senior investment advisor
Canaccord Genuity Wealth Management

“The short answer: no. The long answer: no way. If you want your money to go up in smoke, then by all means. Much like the hit from some good weed – not that I’m speaking from experience – you might feel great for a short time, but the high will quickly fade and you’ll be left wondering where your money went.

Like all hot sectors – who remembers graphite, hydrogen fuel cells, solar stocks? – it will start with a bang and investor interest, but then the interest fades and the stocks will languish. This is the domain of speculators – long-term investors, beware.”

Darren G. Pastro
Branch manager and portfolio manager
Canaccord Genuity Wealth Management

“We have, in fact, been actively invested in the sector since late 2016. I would note that due to the significant oversight and strict regulations of Health Canada, the process of becoming a licensed producer is rigorous and comprehensive, creating significant barriers to entry.

Since the industry is in its early stages, individual investors should be prepared to withstand periods of high volatility, as is the case with almost any emerging growth sector. Given the potential for significant share price volatility, I would strongly recommend that individual investors seek the advice of a qualified investment advisor before committing capital.”

Christopher Dewdney

“The short answer is yes; however, we remain cautious. There are many issues to resolve – overvaluation, competition, regulation, market and, more importantly, legislation – so for now, we remain on the sidelines. As the market grows and becomes more profitable, larger companies – including tobacco companies – will likely enter and take market share from the small to medium-sized players.

Currently, it’s regarded as a speculative, high-risk investment, and thus we would only recommend it to our clients with the appropriate appetite for risk and not exceeding 10% of portfolio assets.”