Portfolio manager admits short-term pain for investors but eyes brighter future
Weeds stocks took a hit yesterday but while investors winced, some in the space believe Ontario’s decision to delay the launch of physical stores will ultimately benefit the industry.
Canadian marijuana shares dropped following that news that bricks and mortar cannabis stores won’t be in place until six months after legalization. The provincial Progressive Conservative government announced on Monday that online sales only will commence on the October 17 legalization day, with private retail sales coming into play on April 1.
Canopy Growth Corp fell 5.7%, Aphria Inc lost 5.3% and Aurora Cannabis Inc slid 4.7% at 10am Toronto time. The BI Canada Cannabis Competitive Peers index fell 1.5% to the lowest since November, bringing its total loss this year to 44%.
Doug Waterson is CFO and portfolio manager at Faircourt Asset Management, which manages the Ninepoint-UIT Alternative Health Fund that invests primarily in companies engaged in cannabis cultivation, production and distribution, nutrition, nutraceuticals and new forms of pharmaceutical solutions.
He said that long term the delay is a positive but admitted there is undoubted short-term pain that will leave many investors frustrated. Days like yesterday, he added, make him thankful his fund diversified into other sectors, although he is far from downbeat about the fledgling industry’s prospects once April 1 comes around.
He said: “It’s going to frustrate some people and companies, and make others happier because it will give them more time to get ready.
“I think the real opportunity is that with the federal government, the legislation in place puts restrictions on packaging and branding and the ability for these guys to differentiate themselves was so limited.
“They should be welcoming the ability of the private sector involvement and, even within the existing legislation, the ability to therefore get better ability to brand their name.
“There is definitely a positive side to this. Look at today’s reaction and people aren’t necessarily seeing that in the near term.”
Waterson also believes that privatization won’t make it harder for investors, although it will mean there are different winners, and that the industry will benefit from the private sector’s rigour.
He said: “[The private market] has an inherently better ability to take market share away from the illicit market. It will be better marketed, more efficiently run and respond better to customer needs.”
Related stories:
Why PM still 'likes' Facebook despite stock plunge
Wealth firm plans major Ontario expansion
