Up in Smoke

I bought into a cannabis company based on a friend’s recommendation. It crashed and burned — with its share price so low that it was not worth selling. Some years later, I read that the company bought an entire town in California and was going to turn it into a “cannabis-friendly hospitality destination.”

I know that chances of this company ever making money are slim, but I am perennially hopeful. When I spot big opportunities like this, I like to look for support companies to invest in — such as, in this case, specialists in grow lights, fertilizer, etc. — Patricia, Scottsdale, Arizona

The Fool Responds: Fortunes have been made when investors spot emerging trends and developments and invest in them early, so your instinct was good, as cannabis (marijuana) is being legalized for medical and/or recreational use in more states lately.

That said, fortunes can also be lost easily when betting on the wrong horses, and in the early years of any developing industry, it can be very hard or impossible to know which companies will prosper and which will fade away. The fact that this was a penny stock when you bought was an extra big red flag, as penny stocks (ones trading for less than about $5 per share) are notoriously volatile and risky. By the way, the company sold that town a few months ago, unable to pay for its big plans.