Largest pension fund in the US invests in marijuana

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A major pension fund likes marijuana stocks, but the choices may be a little puzzling

The marijuana industry continues to see institutional money being invested on a growing level. This is typically a good sign for any industry, as it signals a serious degree of confidence in the industry. Now, the largest pension fund in the U.S. is joining the fray, investing in a number of marijuana stocks that it feels will be long-term winners.

The California Public Employees’ Retirement System (CalPERS), a $350-billion investment fund for retired public employees in the state, submitted its most recent holdings to the U.S. Securities and Exchange Commission (SEC) a couple of weeks ago. Scanning through the never-ending list of target companies in which the fund has investments, a few surprising names stand out.

Among the entries in the investment portfolio are Insys Therapeutics and Tilray. These two choices may seem a little odd, but perhaps the fund managers see things others don’t.

Insys has lost around 50% of its market cap this year. Part of that may be due to the fact that the company was ordered to pay a huge fine by the Department of Justice over some of its sales and marketing practices. Those practices were tied to the company’s Subsys opioid drug. Ironically, the drug that hurt the company’s finances could also be what helps them. Insys is reportedly dropping its opioid business to focus entirely on cannabinoids.

Tilray is a name most investors easily recognize. The Canada-based producer has seen its stock jump 250% this year, with brief spikes of as much as 600%. Some expect the company to have difficulty next year, especially as the lock-up period for its initial public offering will expire on January 15. The stock price will more than likely drop following the period, but CalPERS is obviously ignoring the short-term slides and sees the company experiencing huge gains after its recovery.

Given the market volatility, it is probably better to approach marijuana stocks cautiously. This is also the position CalPERS took. It has not invested a tremendous amount of its assets in the marijuana companies, opting instead for small positions. This wouldn’t be a bad decision for almost any investor.