What happened

Thursday was a day to forget for most stock market investors, particularly holders of marijuana titles. Industry bellwethers Canopy Growth (NASDAQ:CGC), Aurora Cannabis (NYSE:ACB), Aphria (NASDAQ:APHA), HEXO (NYSE:HEXO), and Organigram Holdings (NASDAQ:OGI) all fell harder than the S&P 500 index at declines ranging from 6.1% (Aurora) to just over 8% (Aphria).

So what

The outlook for the marijuana industry has brightened significantly of late thanks largely to both a new presidential administration and a Senate leadership that are more amenable to federal marijuana reform.

A man's hand clutching a marijuana plant.

Image source: Getty Images.

However, this has obscured the fact that cannabis companies remain speculative investments. Weed has only been legalized/decriminalized on a piecemeal, state-by-state basis, and weed companies face many other challenges, including lack of access to basic financial services, price-dampening black market competition, etc. Even the most successful operators struggle to turn a profit and limit cash burn.

So, because they are speculative stocks, they tend to be on the firing line during market downturns. At such times, investors typically embrace better established, and/or more reliable cash and profit generators, and are more tempted to sell their perceived "long-shot" holdings. 

Now what

This shouldn't dissuade investors of marijuana stocks which, despite those challenges, have a promising future. Among other positive developments, Aphria's coming merger with Tilray will make a powerful company, and HEXO is bulking up with the looming acquisition of Zenabis Global. Thursday's declines could very well present good "buy-on-weakness" openings for cannabis bulls.

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.