YOU’D BE A DOPE TO DABBLE IN POT PLAYERS
A COUPLE considering dabbling in the dot bong boom need some advice on investing in pot players.
Barefoot Investor Scott Pape has a simple, old-fashioned rule when it comes to investing — only invest in companies that make money.
But does the medicinal marijuana market a safe choice for first time investors?
An employee at work at a medical marijuana company. CHRISTINE WRITES:
We are in our mid-40s with a combined income of $110,000. We own our home and have an investment property worth about $420,000.
We would like to further secure our future and are thinking of investing a small amount, $3000 to $5000, in shares in a medical cannabis company.
We could invest more but, because we have never played the share market and do not really know anything about it, would like to start small. What are your thoughts, and do you think medical cannabis is a safe choice? BAREFOOT REPLIES: The dot bong boom! Mark my words, the medicinal marijuana business is set to explode. Analysts are suggesting that the domestic market could be worth $1 billion a year, and that the global market could reach as high as $US55 billion by 2025.
Even better, earlier this year the federal government gave the green light for exports of medicinal cannabis.
Health Minister Greg Hunt sparked up a spliff and told reporters, “Australia is brilliantly placed to be a world leader in medical development and medical cannabis”. Exhale.
So it is a good investment?
I have absolutely no doubt that medicinal marijuana will become a huge industry all around the world. And I also have absolutely no doubt that there are hundreds of companies around the world that are looking to cash in on this boom.
Analysts are suggesting that the medicinal marijuana domestic market could be worth $1 billion a year.
Listen, I have a simple, old-fashioned rule when it comes to investing: I only invest in companies that make money.
And none of these medicinal marijuana companies are making any money … yet. Take the largest pot player on the ASX, the Cann Group. Its share price has had a phenomenal run, up close to 500 per cent since May last year, and the company is now valued at about $350 million.
However, they’re also burning cash like Bob Marley rolling a spliff with a hundred dollar note — they lost $1,462,561 in the six months to December 31, 2017.
Despite this, they still hit investors up for more dough, even though they admitted that they had no expectations of being profitable in the short term, and that their financial projections were unreliable.
Look, if you’re just getting started in the share market, don’t dabble in dope. Now, this is the straightest thing you’ll ever hear me say: call your super fund and make a tax-deductible contribution to your fund, man.
Medical marijuana buds. picture: istock
MXC Price at posting:
11.0¢ Sentiment: None Disclosure: Held
