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2020 is the best year to invest in cannabis companies: Entourage Effect Capital CEO

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Published on 30 Jun 2020 / In How-to & Style

CNBC's "Power Lunch" team discusses how cannabis stocks fared in 2019 and what investors should watch for in 2020 with Matt Hawkins of Entourage Effect Capital.

Marijuana, gold, oil, emerging markets and micro caps are just some of the investing themes industry pros expect to work in the year ahead.

“I think this is going to be a big year for cannabis ETFs,” said Dave Nadig, managing director of ETF.com. “It’s been a rough year for most of the cannabis investments, and I think that in 2020, we’re going to see a continued push towards legalization around the world.”

The ETFMG Alternative Harvest ETF (MJ), the market’s largest cannabis ETF in terms of assets under management, has shed nearly 31% in value year to date as many of its underlying securities went through an industrywide reckoning related to longer-than-anticipated product rollouts and overly enthusiastic forward estimates. Rival marijuana ETFs launched earlier this year have shared in the pain.

“The companies that are in these funds right now, I think, are going to get overpriced very quickly and we’re going to see a lot more companies come to play,” Nadig said.

Tim Seymour, who is founder and chief investment officer of Seymour Asset Management and runs the Amplify Seymour Cannabis ETF (CNBS), advised investors to take their time if they’re considering buying into the downtrodden group.

“As a guy who runs a cannabis ETF … my view is that the size of the addressable market has grown,” Seymour said shortly after returning from the MJBizCon cannabis business conference in Las Vegas.

“You’re starting to see separation of the performers and the nonperformers. You’re starting to see capital markets dynamics come to work,” Seymour said. “So, there’s no question about the efficacy [or] what’s happening in the sector. The question is are these companies, right now, you can invest in?”

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