It's probably best to avoid penny stocks, companies trading for less than $5. If these were attractive businesses, investors, especially those hunting for a bargain, would swoop in and purchase their shares, bidding them up in the process. Though some penny stocks will end up experiencing this very phenomenon and delivering market-beating performances in the long run, most won't. Some might think Tilray Brands (NASDAQ: TLRY), a company whose shares are trading for just $2 as of this writing, has a shot at being one of those penny stocks on the way to outsized returns.

It is one of the leaders in an industry whose regulatory landscape could improve in the coming years. However, the cannabis specialist still isn't an attractive stock -- quite the opposite.

Canada legalized recreational use of cannabis for adults in 2018, a move that attracted a bit of a gold rush. Pot growers started popping up like weeds while investors rushed to buy shares of what looked like the most promising players in the field. Canada provides a good counterexample for the claim that friendlier cannabis laws will automatically lead to great returns in the industry. It's hard to find a single cannabis stock that has delivered decent returns since 2018. Tilray is no exception.

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Source Fool.com