Even with the hype around legalized pot, buyers of marijuana shares should still ask simple questions like "why is this company asking for money from the public?" before investing!
The way to identify a story-stock craze — overblown enthusiasm for a sector where there is a good tale to tell about its future — is if the justification for buying into the new hot venture is big on vision and short on detail. When there is a big theme being talked up and an assumption that everything connected to it has to go in the same direction, it is usually wise to be wary. Right now, the buyers of cannabis shares are mesmerised by the bright future of legalised pot. What they are not doing is asking basic questions of securities analysts.