Should cannabis investors be buying stocks in the tobacco sector? Is now a good time to invest in pot stocks? How long should investors hold their pot stocks? These are just a few of the questions we ask Meb Faber, CEO and CIO of Cambria Investment Management.

The Motley Fool sat down with Faber to talk about Cambria Cannabis ETF (NYSEMKT:TOKE). The quant firm's low-cost cannabis fund seeks exposure to the broader marijuana industry with top holdings including GW Pharmaceuticals (NASDAQ:GWPH), Altria (NYSE:MO), and Canopy Growth (NASDAQ:CGC).

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Corinne Cardina: For some of us who have been watching the marijuana market for a while, we've seen some of these cycles of hype and disappointment, generally focused around some catalyst, whether it's Canada opening up their recreational market, Canada opening up an additional recreational market. In the U.S., it's been really piecemeal. I'd love to hear why you think now it's a great time to start investing in cannabis and maybe that can speak to some of our viewers who have not yet taken the plunge into this space, but maybe interested in doing so.

Meb Faber: I tend to be a little bit more sober is probably the wrong word, right adjective. But when approaching ideas like these thematics. Back when we could do events in person I used to go to the Cannabis Conference in Las Vegas, and they had an institutional investing day. I went a few years ago when cannabis was in its upward trajectory of all the stock's going to the moon and sudden on the institutional invest and gain. This was before the fund was launched and looked around and the things that I heard reminded me so much of the late 90s, Internet ideas. People were getting up and giving presentations and saying you cannot value cannabis stocks based on any metrics evaluation. They started coming up with all other reasons why you could only stocks with value and fundamentals was never one and obviously a red flag. I think people were drinking beers and vaping and smoking in the conference. It is about 10:00 AM. With any gold rush, you have people that are attractive from all sides when they see the money flowing. You have big conglomerates, you have people that are a little bit shady, and then of course, companies from all locations and domiciles ready to get in on it. We launched this fund. I actually went on Bloomberg and you can find the video and a very similar question was asked and this would have been, I guess, last summer. This feels like the longest decade ever, this one year. I think it was last summer. 2020 is almost over. We still have two months left. I don't know how that's possible. We still have some more time left in this year. What else could they throw at us? Aliens, I don't know.

Cardina: Don't jinx us.

Faber: Nice aliens though, you never know. I went on TV and they asked me some more question. I said, "Actually, look, I'm not going to stand here and be this unabashed bull." I think many of these companies are pre-earnings. Some of these companies are pre-revenue and the valuations seemed to be pretty expensive. My approach to this is one where it's a decade long approach. It's not next quarter, next month, next year. The way that I think about it is, I want exposure to this theme. It's going to be probably in no other part of the world do I recommend this. A very tiny portion of the portfolio, but the market go down, instead if it goes down 50%, I'll buy more, if it goes down 50% from there, so 75% down, I'll buy more and if it goes down 50% from there, I'll buy more and sure enough, you've largely had that last year where these companies have gotten pummeled. But we might be seeing light at the end of the tunnel. You have these cycles like you mentioned, they tend to wash out a lot of the bad. You have the companies and the created disruption of the free markets that allow many of the sustainable business models to survive. My long-term both thesis also, you mentioned a lot of the catalyst and I think that will happen. Of course, we're talking about them. You may put them under the category of expected. The one that I would've thought might have happened prior to election was that I thought both parties would have tried to outlook each other and get some banking legislation passed. I think the eventual opening up is an inevitable, but I think we all know that. That's just a question of when, not if. Hopefully, things seem to all be moving in the positive direction. You have that second factor I mentioned, which is the mean reversion now. I think a lot of the cannabis indices were down 60, 80 percent. Picked it off, this year one point. That's usually a pretty good setup. This goes back to an old investing joke and says, what do you call a market that's down 90%? There was a market that was down 80% and then went down by half. The problem is just being down 70, 80, 90 percent doesn't mean that it can't go down more and there's still a lot of risk. But long-term perspective usually means that there is some opportunity.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

Corinne Cardina has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.