A very interesting report by. Todd Harrison the CIO and co-founder of CB1 Capital and a columnist for Investopedia.
In late July, we discovered that U.S. institutions began to accumulate U.S. cannabis stocks on behalf of their clients.
That may not sound like a big deal but for the ardent industry followers among us, it’s seismic.
We’ve long spoken about the perception of cannabis as an asset class shifting from denial to migration, and that being driven by a thundering herd of U.S. investors.
He goes on to write…
Putnam Investments LLC, the Boston-based investment manager with more than $183 billion of AUM, emerged as a front-page holder of 4Front Ventures, a U.S. MSO, last month, according to Bloomberg. As of June 30, Putnam owned six million shares, or 5% of the outstanding float; and as we began to further explore the recent filings, we found that they weren’t alone.
Wasatch Advisors Inc., the Utah-based asset manager, is now the second largest holder of Cresco Labs Inc. and an investor in Green Thumb Industries, both Chicago-based MSOs, while Fidelity Investments is an investor in Curaleaf, the Wakefield, Massachusetts-based MSO. An industry insider recently confirmed to me that, “big institutional investors are buying big slugs, quietly.”
While these institutions’ compliance officers could change their minds about allowing access to the sector, the more likely read is that when you see an elephant or two, the herd isn’t far behind. Legitimate growth at reasonable multiples with an expanding total addressable market would excite any investor but for small-cap growth managers, it’s their lifeblood; and those animal spirits have now been unleashed.
As other portfolio managers await approval from upstairs, Advisor Shares announced plans to launch an exchange-traded fund (ETF) focused on U.S. multistate operators as early as month-end. If successful, it would create the first NYSE-listed vehicle that provides pure exposure to U.S. cannabis stocks and it could channel much-needed liquidity into the space.
There’s no denying that challenges remain for the sector, the markets and the world at large; and yes, the pandemic disrupted life as we knew it. But in time, as history reflects on 2020, we believe the emergence of the U.S. cannabis industry as an economic driver and job creator will be seen as one of the most important and positive progressions of this era.