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GW Pharma in Your Portfolio

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 asks, "What's your Foolish opinion on GW Pharmaceuticals  (NASDAQ: GWPH  ) ?”

Brendan explains that GW Pharmacueticals is an interesting company -- it's generated significant returns during the past year as investors have come to appreciate the company's search for disease treatments based on cannabis. The company already has a drug on the market in the U.K. and other countries, and it recently received fast-track approval for a children's epilepsy drug by the U.S. Food and Drug Administration. That said, it's trading at a market cap well over $1 billion, despite generating losses -- so the future for this company is in the pipeline, which is hard to handicap.

For these types of early-stage companies, Jason suggests looking closely at the pipeline -- that's what you're buying -- and perhaps investing in a basket or portfolio, i.e. not "backing up the truck on a single stock." In the same vein, Brendan warns against being overconfident about the pipeline, and he suggests sizing your position appropriately to reflect the wide range of potential outcomes in the drug approval process. 

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Brendan Mathews

A Fool since 2005, Brendan is a research analyst on The Motley Fool's Stock Advisor newsletter. He enjoys scouring financial statements, pontificating on competitive advantage, and any outdoor activity.

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Related Tickers

9/1/2015 12:07 PM
GWPH $103.94 Down -2.41 -2.27%
GW Pharmaceuticals… CAPS Rating: **