I know that 2017 was the year of crypto currencies, but don’t forget about the high risers in the cannabis industry. This past year was another amazing growth year for the industry and now has become truly a worldwide phenomenon. What has followed is companies going global to help fill the needs of these new markets. I know it’s hard to talk about cannabis companies and not think of the dirty hippie coming out of a cloud of smoke. But the leaders of these new companies are not that. Boards of these companies lean towards doctors and tech types. And interestingly this industry also has greater percentages of women in leadership than I have seen in other industries.
Last January I went to the Seed to Sale show in Denver to evaluate possible private placement opportunities. What I saw really did open my eyes to how diverse the companies are that support the cannabis industry. Compliance companies, infrastructure companies for growers, equipment companies, consulting companies, green thumb companies, seed companies, security companies, packaging companies, medical research companies, testing companies, and doctors and botanist were everywhere. The big talk of any provider at any level was going vertical. And over the last year that is exactly what has happened.
Risk in Investing
I talk about risk a lot when I talk investing. Risk in any burgeoning industry is incredible high, but the cannabis industry has its own special risk. Here in the U.S. the known risk of Jeff Sessions desire to wreck shop on the cannabis industry is very real. If he got his way, who knows what the ending outcome would be. I think congress would push back this time around, there’s lots of money being made by the states already. But the threat is real. But other countries are going all-in. Canada will go fully recreational by summer 2018. Uruguay is entering it’s 2nd year as a full medical country. Australia is expanding into medical. California isn’t a country, but if it were, it has the 6th largest GDP in the world is now officially recreational. As more and more countries let expansion happen in their countries, they are looking at the big players in the industry for their expansion. The days of every country or state in the U.S. starting from scratch are over. They are looking at the systems and companies that work best.
So, how do you put your money to work? Growers? Retailers? Ancillary companies? As always, what does your risk say you should do? For most this industry is probably outside their personal investment policy. But if the risk is right, it could be nice uncorrelated piece of your overall portfolio. If there’s a niche investment, there’s an ETF for that, it’s no different here. There is HMMJ listed on the Toronto Exchange, there is MJX listed in the U.S. But be careful, until just recently MJX was focused on Latin America real estate. Now they are investing in the cannabis industry, the ETF basically mirrors the HMMJ. If you open up the hood on these funds they are both heavily weighted to the big players in Canada. The Cronos Group (OTC: PRMCF), Canopy Growth Company (OTC: TWMJF), Aurora Cannabis Enterprises (OTC: ACBFF) all are vertical (grow/process/retail) companies licensed in Canada’s markets. There are also the pharmaceutical companies like GW Pharmaceuticals (GWPH) and then some you wouldn’t think about like Scotts Miracle-Gro Company (SMG). How this industry shakes out over the next few years will be interesting. As big players gobble up small ones, today’s major players may only exist in history.
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