Though many investors are highly enthusiastic about the legal cannabis industry, I have held off from investing in the space. For one reason, I have an aversion to jumping on new and emerging industries that attract a lot of hype. Hype tends to bid valuations up to high levels, and the race for growth sometimes makes companies grow too fast, straining balance sheets.
As reality plays out, competition eats into profits, regulatory concerns can pop up, and any reality that diverges from pie-in-the-sky expectations can cause highly valued stocks to plummet. Warren Buffett has long been skeptical of new and emerging industries, as shareholder returns often fail to match industry growth.
The cannabis industry has had no shortage of cautionary tales, from the completely oversupplied Canadian market to U.S….
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