uploads/// Cannabis Stocks YTD Returns

Why Cannabis Is Not the Same as Bitcoin

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Jul. 31 2019, Updated 2:56 p.m. ET

Not the same

Previously, we discussed Jeffrey Gundlach’s view that cannabis is a “mania” similar to bitcoin. However, that’s clearly not the case. As we discussed in Why the Marijuana Wave May Not Be the Same as Cryptocurrency, there are several differences between the two industries.

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The difference

We believe the rush toward the marijuana industry (HMMJ)—including Canopy Growth (WEED), Aurora Cannabis (ACB), Aphria (APHA), and Cronos (CRON)—is driven by a visible business opportunity. In contrast, cryptocurrencies’ business opportunities lack visibility, as they compete with established currencies.

Any asset that generates cash flow can undergo valuation. Assessing cannabis stocks’ value is easier than assessing cryptocurrencies’ value, as cryptocurrencies do not generate cash flow. Therefore, determining their value and making trade or investment decisions are just a matter of speculation. On the other hand, cannabis businesses have been investing in hard assets that have value and the ability to generate cash flow. While there is real market demand for cannabis, the same cannot be said for cryptocurrencies, at least for now.

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