Should Investors Pile Into HMMJ At This Point in Time?

The current environment for cannabis investors has turned sour, with not much in the way of positive news or tailwinds for the sector.

The exchange traded fund (ETF) that tracks the sector, the Horizons Marijuana Life Sciences Index ETF (TSX:HMMJ), has dropped approximately 65% from its 52-week high, a dramatic loss for investors who have piled in over the past twelve months, anticipating a rebound following similar dips in the past.

The cannabis sector has been surprisingly resilient since the inception of HMMJ; conservative long term investors have generally steered clear of this sector, missing out on much of the incredible upside, but also missing out on the dramatic losses of late which have not spared any cannabis producer.

Attempting to determine whether this index has indeed hit rock bottom is a difficult task, as the headwinds which have pushed valuations lower are likely to continue in the medium to long-term, according to many analysts.

A surplus of supply, issues surrounding a lack of retail locations across various Provinces, and a booming black market which was the target of regulators has left many investors sour.

Growth has not achieved investor expectations, and cannabis infused beverages, oils, and other secondary/ancillary cannabis products have been slow to hit the market.

For the time being, I would encourage long term investors to continue to stay on the sidelines. For those wishing to trade this sector, trade with caution.

Invest wisely, my friends.