Brand building may be the central theme in cannabis for 2022, portfolio manager Tim Seymour says.
After a disappointing 2021 on the legislative front, larger players will use this year to bolster their presence in existing cannabis markets and adjacent industries, Seymour told CNBC’s “ETF Edge” this week.
“As we look forward to 2022, one of the big themes for cannabis investors should be the emergence of the brands,” said Seymour, who runs the Amplify Seymour Cannabis ETF (CNBS).
Tilray CEO Irwin Simon told CNBC this week that his company would take a two-pronged approach to business while legislation hangs in the balance: focusing on countries where the substance is federally legal and developing brands in cannabis-adjacent markets.
“What do you do in the U.S. while you wait for legalization? You build out brands and categories with adjacency to the cannabis industry like the spirits business, like the beer business, like the food and hemp business,” Simon said on “Closing Bell.”
“Ultimately, one day, you will see a beer out there with THC. You will see a bourbon out there with THC. You will see edibles. And we have the brands … that consumers will be aware of.”
This targeted approach should help “insulate” publicly traded cannabis companies against margin pressures after a difficult 2021 in which cannabis ETFs declined between 20 and 40%, said Seymour, who is also founder and chief investment officer of Seymour Asset Management and a CNBC contributor.
“If you think about valuations for the sector, we come into 2022 cheaper than we went into 2021,” Seymour said. “This is a sector that offers higher growth than many other sectors outside of cannabis at much lower valuations.”
It’s no surprise that Seymour’s favorite way to invest in the rapidly evolving space is via his actively managed exchange-traded fund, which he says offers necessary diversification and agility.
“For investors that want to be exposed to this industry that’s changing by the day, in an active ETF strategy, you have the ability to quickly adapt,” he said.
CNBS was the second-best performing cannabis ETF in 2021, second only to Cambria’s Cannabis ETF (TOKE), which is roughly one-third of its size.
Seymour credited his fund’s resilience to owning a global portfolio and to an explosion in the cannabis debt markets that allowed companies such as Green Thumb Industries to issue new types of debt instruments that can help guard against downside during periods of volatility.