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Pot stocks are smoking the ASX again today

The share market is seeing another day of big gains for some of the hottest stocks on the ASX right now. I’m not kidding when I say that marijuana stocks are soaring higher as excitement mounts over how deregulation of the cannabis sector could help pot companies generate some revenues and even turn a profit.

Today the Auscann Group Holdings Ltd (ASX: AC8) share price is up 11% towards a record high of 56.5 cents, after the company announced that the Australian government is moving to relax restrictions over the controlled importation of cannabis for medicinal purposes.

Currently in Australia if a medical practitioner is an “authorised prescriber” they can prescribe medical cannabis products to patients, although the companies aiming to supply it have faced tough legal restrictions preventing them from doing so.

If the government does loosen the restrictions then AusCann would be a step closer to being able to import the product and even generate some sales revenues. Eventually, AusCann wants to get a license to grow its own cannabis in Australia to supply products directly to medical prescribers in Australia.

The company also recently announced a partnership with Canada-based cannabis cultivation specialist Canopy Growth Corp, which is another factor that may be exciting the speculators.

It’s no secret that most people don’t take cannabis for medical purposes though, with the recreational ‘stoner’ market in Australia potentially far more lucrative if the government ever did move to free the weed.

However, it seems the potential of the medical cannabis market has share market speculators excited enough, with other recent listings such as Zelda Therapeutics Ltd (ASX: ZLD), MMJ Phytotech Ltd (ASX: MMJ) and Creso Pharma Ltd (ASX: CPH) all seeing share price gains.

Buy low, sell high? 

These companies and their wild share price movements may attract day traders looking to make a quick profit, but in my opinion they’re not investment grade due to their poor financials.

For example, AusCann has no sales revenues and lost $330,573 in cash outflows for the six-month period ending December 31 2016. Its balance sheet hardly impresses either, even if you allow for the potential $5 million it has raised as part of a recent corporate restructure.

Why get sucked into the Pot Stocks, when you could buy 3 ASX Blue Chips To Buy In 2017

Blue chip stocks means stability, profitability and regular dividends, often full franked..

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If you're expecting to see the likes of Commonwealth Bank, Telstra and Wesfarmers shares on this list, you'll be sorely disappointed. Not only are their dividends growing at a snail's pace, their profits are under pressure too due to the increasing competitive environment.

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Motley Fool contributor Tom Richardson has no position in any stocks mentioned.

You can find Tom on Twitter @tommyr345

The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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