GW Pharma in Your Portfolio

In this edition of The Motley Fool's "Ask a Fool" series, Motley Fool analysts Jason Moser and Brendan Mathews take a question from a reader who asks, "What's your Foolish opinion on GW Pharmaceuticals ?"

Brendan explains that GW Pharmacueticals is an interesting company -- it's generated significant returns during the past year as investors have come to appreciate the company's search for disease treatments based on cannabis. The company already has a drug on the market in the U.K. and other countries, and it recently received fast-track approval for a children's epilepsy drug by the U.S. Food and Drug Administration. That said, it's trading at a market cap well over $1 billion, despite generating losses -- so the future for this company is in the pipeline, which is hard to handicap.

For these types of early-stage companies, Jason suggests looking closely at the pipeline -- that's what you're buying -- and perhaps investing in a basket or portfolio, i.e. not "backing up the truck on a single stock." In the same vein, Brendan warns against being overconfident about the pipeline, and he suggests sizing your position appropriately to reflect the wide range of potential outcomes in the drug approval process. 

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Brendan Mathews has no position in any stocks mentioned. Jason Moser has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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