Marijuana stocks are an exciting topic in the penny stock trading world at this moment in time. With the legalization of pot ever-increasing in the U.S. huge numbers of investors are interested in buying into the industry. Pot stocks have even been branded as the “new bitcoin” due to swarming investors and enormous price fluctuations in recent months.
It is inevitable that investors want to get on this potential profit-churning bandwagon as quickly as they possibly can, in the hope that they turn out to be like today’s blue chip stocks. However, it needs to be considered that the pot industry is not like all others, and marijuana stocks can be a risky investment and are quite unique.
Whilst looking for the best penny stocks for pot, it is important to consider the risks associated with marijuana stocks themselves, and what makes them unique. Marijuana stocks pose some challenges that may not normally be encountered when considering a more “regular” stock:
The industry is new: Legalization of pot not for use in medicine only began in 2012. This means that a lot of marijuana penny stocks are even riskier than buying other penny stocks since new companies in the industry are at high risk of not maintaining business, and their stocks are less reliable in that they could trade less frequently, and could experience considerable price fluctuations. Since marijuana is still to become legal on a federal level, this could pose potential enforcement threats.
However, with the pros and cons of shares in the pot industry itself considered, it remains most important to check for essential points as one would with other penny stocks when trying to find the best penny stocks for pot:
Outstanding shares: outstanding shares refer to the shares of a corporation or financial asset that have been purchased by investors and are held by them.
Dilution: when trading penny stocks, a major factor to consider is the possibility of dilution. Share dilution can happen when the number of shares outstanding expand out of control. This can be a result of many factors, such as employees being offered better share prices and purchasing them, as well as the issuing of shares to raise capitals. If a company releases more shares in order to raise capitals, which many small companies may do, it can often dilute the ownership percentage held by other investors.
Spot a winner: the large majority of companies that trade with share prices of less than a dollar have small market shares, but not always. When investing, most particularly in penny stocks, it is important to consider the strength of the company’s basics. For example, whether or not the company is profitable, whether or not if it will be able to enter profit using its current business structure, and if they are reliant on the issuing of new shares in order to raise capital. If someone informs themselves properly of an organization, its potential, and its current state, there are many excellent opportunities to be found. You can find more about this on https://www.timothysykes.com/blog/penny-pot-stocks/
In summary, whilst looking for penny stocks for pot, it is essential not to forget basics such as the number of shares outstanding. If you are considering investing in pot penny stocks, you should still research a companies basics and combine this research with information on how considerably the shares are being diluted (via stock splits etc). Key issues such as share dilution are damaging to existing shareholders, and are commonplace in all penny stock trading.