What happened

Shares of New Age Beverages (NASDAQ:NBEV) took a hit on Monday, falling as much as 21.9%. As of 2:40 p.m. EDT, the stock was down 20.5%. The stock's decline can be explained by a broader sell-off of marijuana-related stocks on Monday.

New Age Beverages sells ready-to-drink tea, coffee, kombucha, and energy drinks, but it recently announced a product line of beverages infused with cannabidiol (CBD).

A chalkboard sketch of a chart showing a stock price falling

Image source: Getty Images.

So what

Highlighting weakness in marijuana-related stocks on Monday, the marijuana-focused exchange-traded fund ETFMG Alternative Harvest ETF (NYSEMKT:MJ) fell about 10%. Other examples of marijuana-focused stocks to get slammed on Monday included medical cannabis companies Tilray (NASDAQ:TLRY) and Canopy Growth (NASDAQ:CGC) -- down 18% and 15%, respectively, as of 2:40 p.m. EDT.

The sector's decline follows a big run-up in weed stocks recently, as well as the legalization of recreational marijuana last week in Canada. The sector may simply be taking a breather after a big gain.

New Age Beverages' stock is up 108% in the past three months even when including Monday's decline.

Now what

The significant volatility in marijuana stocks recently shows why it's so difficult to predict where a stock can go in the near term. Investors should base their decisions on a company's underlying fundamentals so they can tune out noise and avoid short-term speculation.

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.