Party Interrupted for Pot Stocks on Bubble Fears

(Bloomberg) -- The mania for all things pot-related is in full swing, but some investors are choosing to watch from the sidelines.

Investors pulled $45.9 million from the Horizons Marijuana Life Sciences Index exchange-traded fund last week, the biggest weekly outflow on record. At the same time the world’s largest marijuana ETF rose 12 percent, the most in four weeks.

Shares of marijuana-related companies have skyrocketed ahead of the full legalization of recreational weed in Canada next month, but for some investors the volatility in the pot stocks have been too much to take. Tilray Inc., the cannabis company that saw a nearly 200-point swing last week, is poised for a third daily loss, the longest streak of declines since July, after opening 18 percent lower on Monday on trade below $100 a share. The stock is down 3.2 percent at 10:23 a.m. in New York. New Age Beverages Corp., which soared 287 percent last week, plunged 20 percent Monday.

Canopy Growth Corp. fell as much as 3.5 percent in the U.S. and 4.2 percent in Canada on Monday. Cronos Group Inc., which rallied 21 percent last week, fell 1.9 percent after plunging 6.9 percent at the open.

“There certainly seems to be a bubble in the cannabis stocks, but once the bubble pops, the survivors will be great stocks, just like the survivors of the dot.com bubble have been,” said Matt Maley, an equity strategist at Miller, Tabak & Co. “In fact, we think that any future wash-out in this industry will provide an unbelievable buying opportunity.”

To contact the reporter on this story: Elena Popina in New York at epopina@bloomberg.net

To contact the editors responsible for this story: Courtney Dentch at cdentch1@bloomberg.net, Morwenna Coniam, Steven Fromm

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