This was a record-setting year for the marijuana industry, which put taboo views in the rearview mirror and transformed into a legitimate business model before our eyes.
To our north, Canada put an end to nine decades of recreational marijuana prohibition on Oct. 17. Although it’s going to take a few years before production is able to meet domestic demand, this is an industry that’s fully capable of $5 billion or more in added annual sales during the early part of the upcoming decade.
Within the U.S., it was a similar story. Even with the federal government holding firm on its Schedule I classification for pot (i.e., wholly illegal, prone to abuse, and not having any recognized benefits), two more states legalized medical marijuana (Utah and Missouri), with two others giving the green light to adult-use weed (Vermont and Michigan). Nearly two-thirds of U.S. states have now legalized marijuana in some capacity…
What a buzzkill
And yet, despite the cannabis industry gaining validity, marijuana stocks put up an absolute stink bomb in 2018. Through this past weekend, the Horizons Marijuana Life Sciences ETF, the very first publicly traded ETF, was down 45% year to date, and has given up better than three-quarters of its gains since inception. For context, it had, at one point, more than doubled since its debut in the spring of 2017.
Why has there been such a blatant bifurcation between broad-based cannabis news and the performance of pot stocks this year? Well, blame it on the following three factors.
1. A cannabis shortage will eat into sales and potential profits
The first big problem is that, despite regulators suggesting there would be no initial cannabis shortage come Oct. 17, pretty much everyone else could see that supply was insufficient to meet demand. And the reason supply isn’t able to meet domestic demand is twofold.
For starters, it’s going to take years for Canadian cannabis growers to complete their greenhouse projects, plant their crops, and sell their product. Although they’ve promised pie-in-the-sky production figures, no grower is…
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