Impact of DOJ Announcement, Cole Memo Short-Lived for Most Marijuana Stocks

The third quarter was surprisingly lackluster for publicly traded cannabis companies, with most stocks failing to hold gains tied to a groundbreaking move by the Department of Justice in August.

Six of 12 prominent cannabis and hemp-related stocks came in flat for the July-September period, while two fell. Just four rose in value.

Many investors – as well as CEOs of publicly traded companies – are likely disappointed, as they expected a big stock bounce after the DOJ announced it would let Colorado and Washington State proceed with their recreational marijuana programs and outlined new cannabis enforcement directives (the 2013 Cole Memo).

But cannabis stocks likely won’t stabilize and post real, lasting gains until the federal government actually changes laws or issues a directive that unequivocally allows cannabis businesses to exist. Until then, the growth potential of marijuana stocks is limited – and investors should prepare for a bumpy ride.

Still, the recent DOJ-related developments are certainly good news for the industry and stock investors: They clear the way for retail marijuana shops in two states, reduce overall risk (especially on the medical side of the industry), and signal that the government is reconsidering its approach to cannabis.

Normally, such encouraging trends would send stocks in a volatile industry soaring. And that did happen to some degree immediately after the announcement. Medical Marijuana Inc., for instance, rose 85% that week, while MedBox jumped more than 25%.

But both those companies – and numerous others – lost those gains quickly, in some cases only a day or two later.

Here’s a look at how a dozen cannabis and hemp stocks fared in the third quarter:

Cannabis Science (CBIS): Flat, from 4 cents at the beginning of July to 4 cents at the end of September.

Endexx (EDXC): Up 25%, from 8 cents in July to 10 cents in September.

Endocan (formerly The X-Change Corp.) (XCHC): Down 25%, from 4 cents in July to 3 cents in September.

Fusion Pharm (FSPM): Up 10%, from 30 cents in July to 33 cents in September.

GreenGro Technologies (GRNH): Flat, from 4 cents in July to 4 cents in September.

GrowLife Inc. (PHOT): Up 20%, from 5 cents in July to 6 cents in September.

Hemp Inc. (HEMP): Flat, from 2 cents in July to 2 cents in September.

Medbox (MDBX): Flat, from $25.50 in July to $25.50 in September.

Medical Marijuana Inc. (MJNA): Flat, from 14 cents in July to 14 cents in September.

MediSwipe (MWIP): Flat, from 4 cents in July to 4 cents in September.

Nuvilex (NVLX): Up 20%, from 10 cents in July to 12 cents in September.

Terra Tech (TRTC): Down 30%, from 11 cents in July to 8 cents in September.