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“The stocks have not had a good run but I think everyone has to realize just how early this is,” says Greg Taylor, chief investment officer at Toronto-based Purpose Investments Inc., who manages Purpose Marijuana Opportunities Fund“We’re still optimistic that the sector is in the early innings and some positive news around regulation could really kickstart interest.”
He points to a laundry list of operating pressures on producers – from oversupply and limited differentiation to uneven enforcement against the illicit market as well as regulatory risks. Currently, U.S.-based financial institutions that hold shares for investors won’t take custody of cannabis stocks because of marijuana’s federal status as an illegal substance, effectively prohibiting U.S. investors from investing in the space. The SAFE Banking Act would allow banks to take custody of pot shares.
“It’ll bring down the cost of capital and make credit card payments a lot easier,” Mr. Taylor says. “It would make a lot of on-the-ground level [operations] much better but would also allow more institutions to buy the stocks.”
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