Buy low, sell high? Why pot stocks are lighting up the ASX again today

There’s been something in the air on the ASX recently and it’s inducing some strange behaviour in traders betting on higher and higher share prices in some emerging companies.

These companies don’t have any sales though, let alone profit, but they do offer exposure to the hot commodity of cannabis.

What the kids call the cronick is now a share market star thanks to hype around the potential for sales of medical marijuana to surge due to accommodating new government legislation.

In the years ahead it’s possible that marijuana derivatives normally in the form of orally-ingested capsules could be prescribed for common pain conditions, or to treat conditions like multiple sclerosis, anxiety, or sleep problems.

The investor excitement over potential licensing deals and regulatory approval for companies like MMJ Phytotech Ltd (ASX: MMJ), Creso Pharma Ltd (ASX: CPH) and Auscann Group Holdings Ltd (ASX: AC8) has seen their share prices rocket.

Today MMJ Phytotech is up 27% to a record high of 62 cents, after it announced it has secured approval in Germany to sell cannabis-based capsules to treat pain via its wholly owned subsidiary named Satipharm.

Shares in Switzerland-based Crescent Pharma are also up 24% today, as it boasts of its potential to grow sales of cannabis products.

Unfortunately, neither of these companies have anything in the way of financial revenues and at their hyped and high valuations (MMJ Phytotech now valued at $90 million) I would suggest the shares are a clear sell.

Much of the price action is probably being driven by day traders who may profit via the upward momentum, but be warned if you end up the last buyer you’re likely find yourself selling at a steep loss or holding the bag.

And you’re not going to get rich punting on pot stocks!

So why not get serious and plan for a blue-chip retirement with some expert advice on how to GET RICH in the real world…

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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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