Photographer: James MacDonald/Bloomberg

Why Weed and Gasoline Are More Similar Than You Think

  • Cannabis investors shouldn’t worry about the oversupply
  • Marijuana products to be defined by origin and quality

Cannabis is a commodity and investors should think about it in terms of supply-demand based metrics, right? Not really, according to Eight Capital analyst Daniel Pearlstein, who thinks investors should think of it more as an ingredient or at least as a “graded commodity,” like gasoline that can be found in a gas pump.

“Soon cannabis and derivative products will go from mostly being defined by the literal description of the product to being described by origin, quality, and experiences,” Pearlstein says, likening it to “how you drive up to the gas pump and have four types of gasoline to choose from that are of different quality, purity, refinement, and may come from different locations.”

If investors are worried about the oversupply in the cannabis market, they shouldn’t be, at least not in near-term, he says, forseeing vast demand for the array of cannabis-derived products in a legal regulated environment.

Cannabis stocks saw a relief rally today following a brutal selloff at the start of the year. The BI Canada Cannabis Index has plunged about 34 percent from its January 3 high, mostly on valuation concern and “panic-selling.”

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