Investors in Canadian medical marijuana producers are betting that Ottawa will deliver on its plan to legalize the sale of recreational pot and open a massive new market.
Is the plan at risk?
Canadians are generally perceived as having open minds when it comes to giving people the option to legally use cannabis for recreational purposes. Whether or not they are comfortable having dispensaries set up in their communities is another question.
While the discussion surrounding the legalization of marijuana continues, a surge in the use of opioids by Canadian teens is once again bringing the entire drug problem out into the open.
Reports continue to emerge of young teens overdosing and sometimes dying due to the use of drugs containing fentanyl, a potent synthetic opioid. The death of a 14-year-old girl in an Ottawa suburb recently made national headlines.
Should you own cannabis stocks?
Medical marijuana suppliers, such as Canopy Growth Corp. (TSX: WEED) are trading at extreme valuations right now based on investor expectations that a legal recreational marijuana market is coming soon.
The government may well see the plan through, but there is a risk that Ottawa could drag its feet, especially if MPs start to take heat from voters who think the Liberals should focus on stamping out the opioid problem first.
If Ottawa decides to backtrack on the marijuana file, cannabis stocks could get hit hard.
As such, I would avoid the sector today.