At the halfway mark of 2021, one cannabis exchange-traded fund (ETF) manager believes US companies will continue to perform at top levels with or without help from the feds.
The Investing News Network (INN) sat down with Dan Ahrens, managing director and chief operating officer at AdvisorShares Investments, to discuss the progress of the cannabis market in 2021 and what names he sees as top of the line for his preferred sector, the US cannabis market.
Ahrens acts as manager of the AdvisorShares Pure Cannabis ETF (ARCA:YOLO) and the AdvisorShares Pure US Cannabis ETF (ARCA:MSOS), which were both up for the year as of the end of June.
When it comes to 2021, Ahrens said there’s been a recent dry spell in the stock market for cannabis names, which he attributes to a slower spring and summer for the market. In his eyes, “the last three or four months have been lousy,” which has led to investors getting frustrated over recent numbers. His advice? “We’ve got to remember it’s a long-term game.”
Ahrens has long been a proponent of US cannabis companies compared to Canadian operators. While he admitted that there are bad companies in the US marketplace, he thinks investors will find better plays among the American multi-state operators (MSOs) compared to Canadian producers.
When examining the market, Ahrens expressed a sense of excitement around its maturity since “it used to trade on hype, on hopes and dreams,” and now the best companies are determined by way of balance sheets, revenue and revenue growth numbers. “It’s old-fashioned fundamental stock picking.”
Schumer bill raises questions about US legalization effort
On June 14, US Senator Chuck Schumer introduced a new cannabis legalization bill, which includes the financial adjustments needed for MSOs to trade on US exchanges. “We’ve been waiting for this a long time,” Ahrens told INN about the bill. But the ETF expert is not hopeful about the potential for this legislation to make it through as it stands, saying “politicians have to be politicians.”
The fund manager said investors need to be realistic with their expectations. In his view, the bill “doesn’t have any chance in its current form to go all the way,” but at the same time it should help increase the momentum of cannabis reform.
“No one should expect US legalization anytime soon,” said Ahrens. “We should expect reforms; they’re not coming as fast as anyone would like to see, but everybody agrees we’re going to get some form of banking reform in the near future … we’ll see baby steps.”
Ahrens is confident the political process won’t impact the premium line of US cannabis companies. He said they will continue to operate at a profit, and suggested that any bit of political progress will be a boost for them. “Any kind of reform is a bonus, it’s a leg up, but without any reform they’re operating pretty well and they’re getting pretty seriously undervalued in my opinion,” he explained.
When asked if Schumer’s bill could disrupt or alter the current state of cannabis stock market, Ahrens said volatility will be present in the space, but he views the sector as a long-term play.
“As long as these companies in the US for the most part are listed on smaller exchanges in Canada and trade on the OTC in the US, they are kind of thinly traded comparatively,” Ahrens said in his conversation with INN. “We’re talking about multibillion-dollar companies in many cases, but they don’t see a ton of trading volume and that makes it bumpy as heck.”
Watch the interview above to hear the rest of Ahrens’ thoughts, including some of his picks among the biggest cannabis companies in the US market and what he’s expecting from the back half of 2021.
Don’t forget to follow us @INN_Cannabis for real-time updates!
Securities Disclosure: I, Bryan Mc Govern, hold no direct investment interest in any company mentioned in this article.
Editorial Disclosure: The Investing News Network does not guarantee the accuracy or thoroughness of the information reported in the interviews it conducts. The opinions expressed in these interviews do not reflect the opinions of the Investing News Network and do not constitute investment advice. All readers are encouraged to perform their own due diligence.
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