If American investors think that this is the right time to invest in a loss-making company just because its ticker is brand new, they might want to check the economic climate and wait for a serious Canadian contender to go public.

A defensive play amid recession fears

From hot-desking to cheap rides, the IPO gold rush has left some American stock portfolios looking like ghost towns this summer, with disappointment and burned fingers everywhere you look.

The reason?

It’s been one of the worst quarters for the marijuana market leader, Canopy Growth Corp. (TSX:WEED)(NYSE:CGC). Its stock has tumbled more than 40%, erasing almost all the gains it made this year.

No doubt, this downfall is coinciding with overall flight from risky assets to safety, but Canopy Growth has problems of its own, too. One recent example came this week when this pot producer reported its second-quarter earnings, missing big time on analysts’ expectations.

Americans support legalizing marijuana in record numbers. A Hill-HarrisX survey released in April found that a whopping 84% of respondents support the legalization of pot. Half were in favor only for legalizing medical cannabis, with the other half supportive of legalizing the recreational use of marijuana as well.

With this widespread support, you might assume that U.S. marijuana legalization is a shoo-in. Think again.

By my rough calculations, the odds of marijuana being legalized in the U.S. within the next few years is less than 1 in 300. That's right: The chances that you would flip a coin and have it land on heads eight times in a row are much better than the country legalizing pot anytime soon.

It hasn’t been a great year for those invested in the cannabis sector. Year to date, the Canadian Marijuana Index is down 15% and has been in a steady downtrend since February. The Index hasn’t been this low since the industry experienced strong tailwinds in late 2017.

It’s been almost two years and long-term investors are averaging negative returns. So why is this sector that holds so much promise underperforming the broader TSX Index?

It’s simple: bad news has dominated the headlines. Here are but a few of the newsworthy items that have plagued the sector:

A top analyst recently recommended buying Cronos Group (NASDAQ:CRON). But Piper Jaffray wasn't so bullish on Aurora Cannabis (NYSE:ACB), initiating coverage of the stock with a neutral rating. It wasn't too long ago, though, that analysts were much more positive about Aurora than they were Cronos.

Aurora has outperformed Cronos by a relatively small margin so far this year. Which stock is the better pick looking ahead? Here's what you need to know about how Aurora and Cronos stack up against each other.

Whoever said that stoners were lazy had obviously never encountered any of the organizers for the upcoming Ontario Cannabis Festival in Kitchener. These dedicated marijuana enthusiasts are boasting that they will attempt to set a new record for the world's longest joint. It's actually a lot longer than you might think.

Marijuana stocks took a huge hit this past Wednesday, as the Horizons Medical Marijuana Life Sciences ETF (which tracks the sector) fell 5.87% in a single day.

The day was a bad one for the TSX and for stocks worldwide, but weed stocks were hit worse than most: the TSX fell just 1.86% on the same date.

Between the CannTrust Holdings Inc (TSX:TRST)(NYSE:CTST) scandal and the weed industry’s continued profitability problem, things are looking pretty grim weed stocks. If you’re considering buying any, you should keep the following five facts in mind.

Perhaps it's no coincidence that cannabis is green, because the green rush has generally treated investors well. Those folks with the foresight, and luck, to have invested in some of the pot industry's best-known names are potentially up well over 1,000% in less than four years.

When one of the world’s largest convenience store chains makes an investment in a company, you’d better pay attention.

That is exactly what Couche-Tard(TSX:ATD.B) has done with a $26 million investment in the independent cannabis retailer Fire & Flower(TSX:FAF).

Almost a year ago, cannabis firm Tilray (NASDAQ: TLRY) went public to much fanfare. Within just around 50 days of trading, the stock had propelled almost 800% as investors rushed in to take advantage of the possibilities weed legalization would offer.

The mad rush towards cannabis stocks seems to have ended a year since then, with the industry more stabilized today. Thanks to the rising competition and the better understanding on the challenges facing the industry, marijuana investors have become more choosy and performance-driven.