NextGen Investing: Slow your roll into pot stocks
Old Bethpage-based Power REIT was a sleepy real estate investment trust focused on railroad properties. Then, in July 2019 with its stock trading at $5.90, the company expanded its portfolio to include properties used to cultivate marijuana. With several states having legalized marijuana and others including New York soon to follow, the timing was perfect and the stock surged. On Jan. 13, 2022, Power REIT hit an all-time high of $81.99, a 1,290% gain.
So, are marijuana-related stocks a foolproof get-rich-quick investment? Some investing pros have this advice, especially for young investors: Slow your roll.
Because marijuana is still illegal at the federal level, the Securities and Exchange Commission says companies that grow or distribute marijuana are ineligible to be listed on the Nasdaq and the NYSE. This means many pure-play marijuana companies are listed on small exchanges with little oversight. Power REIT and other cultivation property owners, however, because they are just landlords and not directly involved in the cannabis business, do not face this SEC restriction.
And while New York voted to legalize recreational marijuana last year, you can’t sell it here legally yet. Some states, like California, Colorado and Arizona, allow residents to purchase marijuana from state-licensed dispensaries. But as Bankrate notes, what’s legal now could be illegal tomorrow because laws "may swing based on which political party is in power."
Amid the uncertainties, many high-flying marijuana-related stocks are down considerably after posting eye-popping gains the past few years. Case-in-point: Power REIT. Its stock was $48.26 at the end of February, down 41% from its all-time high just a month earlier.