Posted on 19 January 2014.
Even at this early stage of development, it is important to find the best marijuana penny stocks to trade and invest in to increase your chances of successfully trading or investing in the marijuana sector. Since the marijuana industry is so young, it is hard to determine which companies are the strongest and which marijuana penny stocks might produce the largest gains in the long run. However, it is not too early to start looking at what these budding companies are made of and the tangible assets they have that might lead to their success.
One thing that can be done at this point is to identify the marijuana companies and penny stocks that have real potential to succeed and avoid the ones that are obviously scams. Many penny stock companies are jumping into the marijuana sector because it is such a hot sector of the stock market. Similar to the dot.com stock mania of the late 1990s, any penny stock company that mentions intentions to enter the marijuana business is seeing a spike in the price of their shares. Penny stock companies that do not have established marijuana businesses and appear to just be promoting themselves as players in the marijuana industry should be greeted with skepticism. It is best to avoid these stocks as long-term investments, and trade them with caution, as they likely will not have the ongoing marijuana business operations to justify their short-term stock price spikes.
What factors do you need to consider when searching for the best marijuana penny stocks to trade and invest in? The following are some of the most important factors that help traders and investors sort through the myriad of penny stocks connected to the marijuana industry to find the strongest candidates and screen out the questionable ones that should be approached cautiously or avoided altogether.
Any stock remotely connected to the marijuana industry has seen an increase in price as the marijuana sector has rallied. Many companies that are primarily focused on providing products or services to the burgeoning marijuana industry have seen their stock prices increase by hundreds and in some cases even thousands of percent. Of course, not all stocks classified as marijuana stocks are of equal stature. Some are bonafide companies that are growing marijuana-based businesses, while others are just latching onto the stock craze and proposing marijuana related business ventures that are only tangentially related to the marijuana industry or have no realistic chances of succeeding.
Since the marijuana industry is such a young fledgling industry that is just getting started, many of the companies involved are quite small penny stocks that trade on the Over The Counter (OTC) markets, including the Over The Counter Bulletin Board (OTC BB) and the Pink Sheets (otcmarkets.com). It can be difficult to figure out which companies are in the marijuana sector. For a list of marijuana stocks that are publicly traded on United States stock quotation services, see List of Marijuana Stocks To Profit From Marijuana Business.
With the online message boards buzzing with chatter about which publicly traded marijuana penny stocks to invest in and ones to trade for a quick pop, traders and investors have to step back and keep things in perspective. As stated above, not all penny stocks in the marijuana sector are of equal stature or have the same prospects for success in the future. A trader or investor cannot just throw money at marijuana penny stocks and expect it all to work out. Some stocks in this sector will excel and turn into huge business enterprises, as marijuana is legalized in more areas of the United States and throughout the world; however, other stocks will decline, as their marijuana business plans do not pan out.
Do not get caught up in the hype. Marijuana penny stocks tend to spike higher when the news flow is positive and then drift lower until the next news-driven price spike. Carefully assess which marijuana penny stocks are worth trading and investing in, and chose entry points carefully.
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