Canada’s decision to legalize the recreational use of cannabis has allowed the rise of an emerging investment market. The cannabis public sector has become one of the most followed industries for investors.
As such, the Investing News Network brings investors a collection of stories on the critical transition and its impact on the public markets.
A portfolio manager says investors shouldn’t expect fireworks for cannabis stocks on legalization on Wednesday (October 17).
As part of the continued coverage on the effects the legalization of recreational cannabis in Canada will have on the public sector, the Investing News Network (INN) had the opportunity to talk with Greg Taylor, portfolio manager with Purpose Investments.
Taylor is also the active manager for the Purpose Marijuana Opportunities Fund (NEO:MJJ), a cannabis fund offering investors a managed level of exposure into the sector. Taylor is tasked with researching the market and keeping up to date with the volatility of the sector.
The portfolio manager told INN he viewed the blitz following Constellation Brands’ (NYSE:STZ) second investment deal into Canopy Growth (NYSE:CGC,TSX:WEED) as the euphoric rush already making its presence felt in the market.
“That’s what really woke up the US retail investors… I think that last move we had in September was all US retail and some global investors coming in,” Taylor said. “It almost feels like we got that euphoric move already, it almost feels like [October] 17th is going to be more of a non-event.”
The manager said he’s worried about the lack of exposure the market will get, particularly in Ontario where there will be no physical stores until 2019.
“I think we can see another wind of excitement come once we can actually start to get some numbers and figure out who actually is making some money,” Taylor said.
As more consumer good companies with established names appear close to obtaining cannabis partnerships, Taylor predicts these deals will become exclusive and prevent cannabis producers from signing with multiple interested parties.
When asked about managing volatility in the industry, Taylor said the fund has a substantial cash component to it — meaning when the cannabis space rises over the desired levels, the fund raises cash so as to not be “fully invested at all times.”
Taylor said he specifically looks for value in low cost producers of cannabis as he expects the price of the drug to drop fast.
“The marijuana space stood out as one of the few pockets of the Canadian market that there still is a lot of volatility,” he said. “We’ve lost the resource market. [It] seems that people used to go to the junior oils or golds for that volatility, and really it hasn’t been there.”
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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 the interviews it conducts. 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.