In this edition of The Motley Fool's "Ask a Fool" series, Motley Fool analysts Jason Moser and Brendan Mathews take a question from a reader who writes, "What do you think of investing in up-and-coming companies related to medical marijuana?"
Brendan notes that over 20 states now allow medical marijuana. That along with recent recreational legalization in Colorado and Washington has created a lot of buzz among investors who see potential in marijuana, medical or otherwise. To take advantage of the excitement, over 60 marijuana-related stocks have popped up. Unfortunately, very few of them have proven business models. Even the CannaVEST (CVSI 8.15%), one of the larger stocks, is losing money.
Jason points out that legal issues still exist, and many of these stocks are penny stocks, which typically aren't smart investments. Brendan suggests that if you want to take advantage of marijuana, avoid these new penny stocks. Wait and see if a profitable winner emerges. There will still be potential for growth, but the downside of investing with a proven company is significantly less than investing in unproven, promotional, penny stocks.
