The Motley Fool

Would I buy high-growth cryptocurrency and cannabis stocks?

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

Graph of price moves, possibly in FTSE 100
Image source: Getty Images.

Cryptocurrency infrastructure provider Coinbase made a notable debut at the stock markets earlier this week. To me, this brings investor interest in high-growth stocks in segments like cryptocurrency and cannabis into sharp focus. 

Cryptocurrency challenges

Consider the UK-listed cryptocurrency miner Argo Blockchain. Its share price increase since the start of this year has been nothing short of meteoric. It has fallen from its highs in recent weeks, but the share price is still way above its levels last year. 

5 Stocks For Trying To Build Wealth After 50

Markets around the world are reeling from the coronavirus pandemic… and with so many great companies trading at what look to be ‘discount-bin’ prices, now could be the time for savvy investors to snap up some potential bargains.

But whether you’re a newbie investor or a seasoned pro, deciding which stocks to add to your shopping list can be a daunting prospect during such unprecedented times.

Fortunately, The Motley Fool UK analyst team have short-listed five companies that they believe STILL boast significant long-term growth prospects despite the global upheaval…

We’re sharing the names in a special FREE investing report that you can download today. And if you’re 50 or over, we believe these stocks could be a great fit for any well-diversified portfolio.

Click here to claim your free copy now!

This rally has been driven by increasing prices of Bitcoin, its own rising revenues, and expansion to climate-friendly facilities in Texas. 

The challenge, though, is this. Cryptocurrencies are far from mainstream. They are one regulation away from being completely unusable or a bad investment. 

Untested cannabis market

Similar fears are valid for another sector – cannabis. Even though medical marijuana is a promising sector, it is still relatively untested. The first ever cannabis stock listings were in 2014 in Canada, and they started getting listed on US exchanges only a few years after that. 

It is only recently that the UK has allowed for listing of cannabis stocks, which quickly saw three companies, MGC Pharmaceuticals, Kanabo, and Cellular Goods, get listed here.

But one fear is that cannabis-based products could go the way of vapes. If new research negates their positive impact and bad press reduces consumer interest, things could go south for this market. 

Yet, all three listings were well received.

Trends in high-growth stocks

With this as the backdrop, as an investor I find it tempting to consider buying these stocks. But there are three data trends to consider here. 

One, Argo Blockchain’s share price is down more than 40% within two months of hitting new highs. This indicates how fast investor mood can change for speculative stocks. 

Two, UK-listed cannabis stocks have also seen a fall in share price since listing. This is despite there being no visible, fundamental reason for it. This is similar to Argo’s experience, where perception rather than performance is driving investor interest. 

Three, the sharp rally seen in electric vehicle (EV) and related stocks since November last year also shows that a correction can follow quickly. For instance XPeng, the Chinese EV maker got listed in the US in August last year. By the end of November, its share price was up 3.5 times. It has halved since. Even the more popular NIO has fallen quite a bit. 

What I’d do now

However, that does not mean these sectors are a no go. There are different ways I could approach investing in these sectors.

I could consider stocks like MGC Pharmaceuticals, which has been around for a while and can be assessed based on its financials. Another way for me is to allocate a (very) small proportion of my portfolio to speculative growth stocks. So if they do well, it is a win for me, but if they do not, I would still not impacted much.

The high-calibre small-cap stock flying under the City’s radar

Adventurous investors like you won’t want to miss out on what could be a truly astonishing opportunity…

You see, over the past three years, this AIM-listed company has been quietly powering ahead… rewarding its shareholders with generous share price growth thanks to a carefully orchestrated ‘buy and build’ strategy.

And with a first-class management team at the helm, a proven, well-executed business model, plus market-leading positions in high-margin, niche products… our analysts believe there’s still plenty more potential growth in the pipeline.

Here’s your chance to discover exactly what has got our Motley Fool UK investment team all hot-under-the-collar about this tiny £350+ million enterprise… inside a specially prepared free investment report.

But here’s the really exciting part… right now, we believe many UK investors have quite simply never heard of this company before!

Click here to claim your copy of this special investment report — and we’ll tell you the name of this Top Small-Cap Stock… free of charge!

Manika Premsingh has no position in any of the shares mentioned. The Motley Fool UK owns shares of and has recommended NIO Inc. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Our 6 'Best Buys Now' Shares

Renowned stock-picker Mark Rogers and his analyst team at The Motley Fool UK have named 6 shares that they believe UK investors should consider buying NOW.

So if you’re looking for more stock ideas to try and best position your portfolio today, then it might be a good day for you. Because we're offering a full 33% off your first year of membership to our flagship share-tipping service, backed by our 'no quibbles' 30-day subscription fee refund guarantee.

Simply click below to discover how you can take advantage of this.