By Carlo Versano
The bull run in cannabis stocks is "absolutely not" sustainable and is headed for a retrenchment, said Matt Karnes, founder of GreenWave Advisors, a research firm that specializes in the budding legal pot industry.
Shares of companies like Canopy Growth, Tilray, and Cronos Group ー all based in Canada ー have seen double-digit gains in the past week. Marijuana stocks have been caught up in a flurry of deal-making, partnerships, and acquisitions as the industry gains legitimacy.
Investors have been reacting to each new headline with knee-jerk enthusiasm, Karnes said. Constellation Brands' investment in Canopy is one example ー news of the deal sent shares of the target company up 30 percent ー but Karnes doesn't think the enthusiasm can continue at the same clip.
"The excitement comes from the potential of the marketplace, and we're nowhere near seeing what that marketplace looks like," he said in an interview with Cheddar Tuesday. "Let's see what sticks to the wall."
Companies that make a lot of money off beer sales, which are trending down, seem like natural suitors for cannabis makers, he said. Those are smart, defensive plays. But Karnes remains skeptical that these big beverage brands can refashion themselves as pharmaceutical companies by trying to enter the medical marijuana market.
He is bullish on cannabis long-term, though ー so much so, that he started his own research firm just for the sector.
Marijuana is set to become legal for adult recreational use in Canada this October. Karnes said it's an exciting moment for anyone invested in the growth of the cannabis industry, but it's still crucial to apply due diligence ー and not just buy on the rampant speculation.
He also said recreational and medical cannabis should be combined into a single sector that can be regulated by one authority.
"It's basically the same product, for all intents and purposes."
For full interview click here.