I regularly ask myself, ‘what’s the most hated stock in the market?’ because it usually leads me to opportunity. Asking myself this question recently I came across the cannabis stocks which have recently gone from rapidly expanding bubble to painful bust. Just take a look at a chart of Tilray (TLRY) over the past year to get a feel for what’s gone on in the broader cannabis space.

As a group, these things have been hit super hard. After peaking in January of 2018 at around 360, the North American Marijuana Index recently fell to 110, a decline of nearly 70% – most of which occurred over just the past six months. So you would think the cannabis names must be getting cheap but when looking at the constituents of this index a bit deeper, they are far from it.

The four most active stocks in the index are Canopy Growth (CGC), Cronos (CRON), Aurora Cannabis (ACB) and HEXO (HEXO). Together they carry a market cap of $11.6 billion on sales of $542 million leaving an aggregate price-to-sales ratio of 21. That might not be totally outrageous for a really fast-growing and hugely profitable business. And, it’s true these companies are fast-growing but profitable is another story. All four sport operating margins deeply in the red.

I find it hard to make the case that the valuations here are anywhere close to reasonable even after the 70% decline the stocks have suffered. But what’s really keeping me away is the fact that these stocks aren’t hated at all. In fact, Aurora, Canopy and Cronos are among the top ten most popular stocks among Robinhood traders. HEXO currently stands #11. Frankly, I’m amazed that these traders still haven’t given up on a group that has absolutely stunk up the place over the past six months.

Perhaps they’re just dead set on learning the same lesson all those dotcom traders learned 20 years ago: Even after losing 50% and then another 50% sometimes it takes another 50% decline (or two) to find the bottom. That’s not to say the recent rally can’t continue for a while; the stocks are pretty oversold. But until they get significantly cheaper and become truly hated it doesn’t look to me like the bursting of the cannabis bubble is over just yet.