Canada’s highly anticipated recreational marijuana market opened on Wednesday. And after months of waiting, Canadian marijuana stocks pretty much fizzled.
The three biggest Canadian marijuana producers by market cap — Tilray (NASDAQ:TLRY), Canopy Growth (NYSE:CGC), and Aurora Cannabis (NASDAQOTH:ACBFF) — saw their share prices fall by several percentage points. Each of the stocks soared in the weeks leading up to the opening day of the recreational marijuana market. But now that the big day has arrived, the excitement seems to have worn off.
What should investors’ response be after the blah performance for marijuana stocks on Wednesday? The one thing you should do is…nothing….
Why nothing is better than much ado
First, let’s put the declines of Tilray, Canopy, Aurora, and their peers into perspective. Single-digit percentage drops after weeks of huge gains are practically irrelevant. It’s not that there’s been much ado about nothing — there hasn’t even been much ado.
Even if marijuana stocks had fallen further, doing nothing would be better than making a knee-jerk reaction. It’s tempting to read too much into short-term movements. At this point there’s no reason to think the Canadian recreational marijuana market will underperform expectations, or that the major cannabis producers’ sales won’t skyrocket.
Warren Buffett’s mentor, Ben Graham, had it right when he said that “in the short run, the market is a voting machine but in the long run, it is a weighing machine.” Temporary stock price fluctuations reflect only snapshot popularity votes. Yesterday, Canadian marijuana stocks simply weren’t as popular as they’ve been in recent weeks.
But over the long run, the substance of the businesses behind each of these stocks will be…
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