People hoping to profit from Canada’s booming marijuana industry should broaden their focus from big producers and consider less-known sectors likely to grow even faster, an investment specialist says.
Companies that test pot safety and potency, handle warehousing and transportation, run dispensaries, perform research or handle other aspects of the business have lots of potential and not much attention, Everett Knight, a portfolio manager with Calgary’s Matco Financial, said Tuesday.
“We look at the market today as being around $500 million in annual revenues, and we think that’s going to $16 billion,” he said in an interview.
“If you look at (consultants) Deloitte, they think it’s going to be $22.6 billion, and a large portion of that comes from ancillary businesses.”
Knight, one of four panelists at a seminar on legalizing cannabis organized by the University of Alberta School of Business, is the lead manager of a $25-million to $50-million cannabis investment fund Matco is establishing.
Nearly 500 public and private firms
He started following 16 publicly traded companies last year, and now has a database of roughly 500 public and private firms.
“Most of our clients are invested in a few licensed producers … If you look at the valuations and how rapidly it’s expanded, there’s a lot of risk there,” he said, adding that while legalization is scheduled for July 1, delays in passing legislation mean recreational pot might not be available until a few months later.
“What investors have to look for is companies that will be here five years down the road.”
Allan Cleiren, chief operating officer of Aurora Cannabis, said their 800,000-square-foot building near the Edmonton International Airport will be the world’s most modern greenhouse.
Canada is at the forefront of the cannabis industry and the opportunities are vast, he said.
Staffing agency focused on cannabis sector
Alison McMahon, chief executive of Cannabis at Work, said her firm has provided education to more than 1,000 people about how to handle job-related issues involving medical and recreational marijuana, as well as running the country’s first staffing agency focused solely on the cannabis sector.
Kam Nemec, founder of GreenGreen, which works on cannabis and financial technology, expects marijuana tourists from the United States.
One question to resolve is how these visitors will pay — marijuana is illegal under U.S. federal law, making it tough for credit card companies to handle transactions by Americans buying the drug, he said.
But Canadian companies must take advantage of being among the first in the recreational market, he said.
“How can we develop the technology here … and then export it to the world,” he said.