Purpose Investments’ chief investment officer gives his end-of-summer takeaways for the maturing cannabis investment market.
One marijuana stock expert thinks the market is settling on traditional metrics to evaluate companies in the space following a punishing set of summer months.
As the summer nears its end, the Investing News Network (INN) caught up with Greg Taylor, chief investment officer with Purpose Investments, to discuss the most recent quarterly earnings season and how investors are maturing alongside the marijuana space.
Read on to find out about why Taylor thinks cannabis investing is becoming more difficult as part of this maturity process.
Cannabis industry focusing on “normal metrics”
After extended hype and promotion around marijuana stocks, Taylor said he is seeing a direct shift into valid metrics that can properly capture the growth and development of these companies.
“After many years where everyone was just focusing on big growth plans and putting out flashy press releases, it now seems to be a switch to coming back to operating numbers; we’re focusing more on the cost of sales, we’re talking about normal metrics,” the executive told INN.
Taylor also acts as one of the portfolio managers of the Purpose Marijuana Opportunities Fund (NEO:MJJ).
He explained investors are moving towards only getting influenced by results and performance, a change that Taylor said is welcome in the Canadian cannabis investment market.
“I think (that’s a) big shift that had to come to the sector and it seems like it’s finally here in the Canadian investor,” he said.
As this maturity continues to spread across the Canadian cannabis stock market, the expert said it’s making it more difficult to invest in these names.
“For awhile, I think we were in a phase where people were still excited about the entire sector … you could almost buy any of these companies (and) they would go up and you would be able to make money on them,” Taylor told INN.
“Now that seems to (be) changing … we’re getting a big differentiator between the winners and losers, and the reality is there’s way too many companies in the sector.”
Consolidation in the cannabis market?
When asked if he expects to see shutdowns of existing marijuana companies in Canada, Taylor said he views the market as having no need for this many existing companies.
He anticipates that public companies will survive based on servicing niches that can appeal to investors.
Taylor said he has noticed investors are adding geographic diversity to their investments with regions including the US, Europe and even Asia.
Taylor further noted that the reason investors are looking abroad at some of the emerging companies there is because they offer the potential for a bigger market share and less competition.
However, the portfolio manager said he does not think investors need to completely abandon the Canadian cannabis play.
“Canada got a lot of investor attention because we were the first market to open up; that was unique, and when you have a unique opportunity you get a scarcity premium,” he said.
In short, Taylor is not ready to give up on the Canadian cannabis market, but he is asking for investors to diversify their marijuana portfolios and look at different geographies.
Don’t forget to follow us @INN_Cannabis for real-time news updates!
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.