Chart of the Day: Hindsight is Always 20/20

Today’s Chart of the Day is a reminder that investing in the “next big thing” can be fraught with risk, and, in this case, cannabis-related companies are the focus. My finance professor at the University of Florida, Dr. David Nye, always said, “Hindsight is always 20/20,” and in this case, this is very apparent. We often talk about “moats” which are likened to figurative moats around castles, and essentially ask, "How difficult is it for a competitor to take over market share?"

For McDonald's, Home Depot and Apple, due to prime real estate locations, technology, and strong brand recognition, it is hard for new competitors to recreate their success. However, for cannabis companies, competitors can simply go to any viable plot of farmland and plant a new crop that grows “like a weed.” In 20/20 hindsight, the difficulty for new competitors to corner the market is apparent five years later when the index declined 92% from the peak in 2018 vs. the S&P 500 index’s gain of 50%+.