As the Cannabis Growth Fund made its debut in the public market last Tuesday (February 26), the Investing News Network (INN) caught up with its portfolio manager Korey Bauer, a managing director with Foothill Capital Management.
For the fund, Bauer said it will focus on the long-term growth potential in a company, the branding abilities and the current market exposure.
The portfolio manager also highlighted taking a more critical look at the management team of a company, saying with the increasing costs these companies are incurring, it is “absolutely crucial” to study the leaders of a marijuana firm.
“In the next six-to-12 months, we’re going to start to see a breakaway between the leaders and the laggers,” Bauer said regarding Canadian firms.
In the Canadian cannabis market, 2019 will potentially mark the legalization and opening of the edibles and infused products space.
Recently, Bill Blair, Minister of the Cannabis Act, told Bloomberg the legalization in paper of edibles, doesn’t mean sales will start right away.
The Canadian government has until October 17, 2019 to legalize these products.
Bauer said the roll out of edibles will be “crucial” for the development of the market and to see the split between Canadian firms in control of the market, and those struggling to break through.
The Cannabis Growth Fund will not add any companies in the US dealing with the cannabis plant directly, according to Bauer, leaving the popular multi-state operators out of the investment picture.
“With some of these multi-state operators, no question they are taking up some quite a bit of market share pretty quickly,” he said. “I do think that’s going to make it a little bit more challenging for some of these Canadian companies to breach into the US.”
The initial holdings for the fund were not disclosed, but Bauer told INN the full list would be shared in a month or two.
According to the prospectus for the fund, Foothill Capital Management is expecting for “a large number” of the fund’s holdings to be Canadian companies.
Bauer said he expects to see pressure rise for Canadian companies focussed on pure producer plays in the market.
In terms of the upcoming cannabidiol (CBD) play in the US thanks to the legalization of hemp, Bauer told INN he expects the craze for this market to settle with sensible regulations from the US Food and Drug Administration in the near future.
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Securities Disclosure: I, Bryan Mc Govern, hold no direct investment interest in any company mentioned in this article.
Editorial Disclosure: The Investing News Network does not guarantee the accuracy or thoroughness of the information reported in contributed article. The opinions expressed in these interviews do not reflect the opinions of the Investing News Network and do not constitute investment advice. All readers are encouraged to perform their own due diligence.