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The marijuana industry has been kicking “bud” and taking names since the year began. Through April 23, the broad-based S&P 500 was up 17% year to date, representing one of its strongest starts to a year in decades. Comparatively, though, the Horizons Marijuana Life Sciences ETF, the first cannabis exchange-traded fund, had gained 45%, leaving the broader market to breathe in its secondhand smoke.
Investors are clearly enamored with the prospects of recreational legalization throughout North America. Canada became the first industrialized country in the world to green-light adult-use cannabis in October 2018, and momentum appears to be building in the United States to reform existing federal weed laws, which still hold cannabis to be a wholly illicit drug that’s prone to abuse and has no recognized medical benefits. This call for reform is made even stronger with two-thirds of all states having legalized medical pot in some capacity, and two-thirds of all Americans in favor of broad-based legalization, per Gallup.
But make no mistake about it — growing momentum does not make every marijuana stock a buy. In fact, it makes unproven penny stocks potentially all the more dangerous.
One such marijuana penny stock that looks to have its act together on the surface, but is actually bad news once you do some digging, is Medical Marijuana (NASDAQOTH:MJNA), the first-ever cannabis stock to list its common stock for trade in the United States — albeit on the over-the-counter exchange. Although trading at only $0.06 per share, it’s more than 3.5 billion outstanding shares yields a somewhat respectable $219 million market cap.
