Marijuana stocks have historically been a volatile bunch. This year, that tendency shows no signs of going away, as shares continue fluctuating wildly day in and day out. To a certain extent, the volatility in the weed sector is to be expected. After all, marijuana companies were emerging growth startups just a few years ago, and they’re still young enough to experience dramatic price swings. Nevertheless, it’s surprising that marijuana stocks have given investors such a bumpy ride with their market caps approaching $10 billion.
The extreme volatility in weed stocks has been aggravated by the fact that the industry is posting largely mixed news. Although revenue growth has been better than ever, losses are mounting, and now some marijuana companies are even under investigation by Health Canada. So, it’s no surprise that marijuana returns have been pretty lame this year overall.
However, not all marijuana stocks are created equal. While many of them are down this year, others are still up, and the sector as a whole is up very slightly for the year. If you’re curious about how marijuana stocks are really performing in 2019, the following three hypothetical scenarios for a $10,000 investment can help you get a sense of what’s happening.
Marijuana stocks as a class
Although there’s no official “TSX marijuana stocks sub-index,” we can gauge how marijuana stocks are doing by looking at the performance of ETFs that track the sector. One example would be Horizons Medical Marijuana Life Sciences ETF. This ETF holds all the major TSX and NASDAQ marijuana stocks and weighs them according to their market cap. So far this year, HMMJ is up 9.44%, which means that if you’d invested $10,000 in it at the start of the year, you’d be up to $10,944 today.
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Aurora Cannabis (TSX:ACB)(NYSE:ACB) has been one of the better-performing marijuana stocks this year. Consistently growing its revenue at 300% or more year over year in recent quarters, it’s up 24.46% year to date. However, the stock has been losing value in the last few months; at one point, it was worth $13.26 and was up 84% year to date.
Nevertheless, even with Aurora’s dramatic slide in more recent months, its year-to-date return has beaten the TSX handily. If you’d invested $10,000 in it at the start of the year, your position would be worth $12,400 today.
Canopy Growth (TSX:WEED)(NYSE:CGC) is the largest marijuana company by revenue and market cap. However, it hasn’t been the best performer this year by any stretch of the imagination. After posting a whopping $323 million net loss and firing its CEO Bruce Linton, the company started on an epic downtrend and is now down 36% from its peak price. Even with the recent losses, its whole-year return is still positive, standing at 13.49%. If you’d invested $10,000 in Canopy at the start of the year and held to today, your position would be worth $11,349.
This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.
Fool contributor Andrew Button has no position in any of the stocks mentioned.