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Guide to Investing in Medical Marijuana Stocks

Investors are rushing to buy stocks of companies that offer medical marijuana thanks to more states legalizing its use. Most traders are buying medical marijuana stocks in anticipation of great profits stemming from the seemingly endless benefits of the plant. However, before you purchase medical marijuana stocks, it pays to do your research well. Research has shown that majority of investors do not do a background check on the companies whose stocks they wish to purchase. Doing your homework well will increase your chances of making good investment decisions. Remember, you are buying a company’s stocks, not the business of medical marijuana.

Studies have shown that most average investors buy or sell stock based on the information they get from the news. This can be both good and bad for the investors. Investing without carrying out due diligence is dangerous as was shown by the past market crashes. When you are only following the news to make your investment decisions, your success is likely to come to a sudden halt and leave you with painful losses. This is why it is important to do your research well before jumping to invest in medical marijuana stock. Before investing, consider the following:

Background of the Company
Carry out due diligence of the company whose stocks you want to buy. Find out about the company’s products, business model and how it is run. You can use various resources to know more about a company that you wish to invest in, For example, you can go through its website for more information. Another option is to contact the company and find out whether you can get investor educational content. Finally, if you can, attend one of the annual general meetings that the company may hold. Gathering information from various trusted sources will give you a good idea of the company’s business model.
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Check the Profitability of the Company
You should also check whether the company whose stocks you wish to buy has been making profits. Determining the profitability of a company may not be a straight-forward process as it looks. This is because many things can determine the profitability of a company. To know the net income that the company realized within a specific period, go through its quarterly or annual financial reports. Check that the income the company reports is broken down in per-share earnings and in dollars.
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The Company’s History on Earnings
Check whether the company has been making profits over the years. You can easily find this information by checking the company’s past earning reports and scanning old news stories.