Yahoo Finance’s Seana Smith and Adam Shapiro speak with Noah Hamman, CEO of AdvisorShares, about the implications for marijuana legalization on cannabis stocks.
ADAM SHAPIRO: We're talking about cannabis, marijuana, use the term you like best, because five states have taken the steps to legalize both medicinal, as well as recreational use of marijuana. So let's talk about where to invest on all of this. And we invite into the stream AdvisorShares CEO Noah Hamman.
Good to have you here, Noah.
NOAH HAMMAN: Thank you, Adam.
ADAM SHAPIRO: And one of the things in the notes that you provided, you said beware the Canadian weed stocks. Why?
NOAH HAMMAN: Because they don't benefit from this, we'll call it a green wave that we saw last night, right, a unanimous across the board for the five states that had measures on the ballot. It's still just state-focused. And so you've got a lot of companies that get the headlines like Aurora, or Canopy, or Cronos, all Canadian companies, they all benefit zero right now from the legalization that you saw in various levels, whether it's adult recreational or medical in those states.
So people look to those stocks because they get a lot of headlines and think, oh, I'm going to buy those. And if you look today, there's a few cannabis ETFs that are just heavily weighted in the Canadian space, and they're down 3%. We have an exchange traded fund with the ticker symbol MSOS that focuses just on the US operators, public companies, and we were up today, only a little bit. It's still going to be a volatile space. But you want to be smart about the stocks that you're investing in relative to what you saw happen last night.
SEANA SMITH: Hey, Noah. It's Seana. When you take a look-- that's interesting, because last hour we were talking about the fact that a lot of these big cannabis stocks that we follow very closely here on Yahoo Finance, they were under pressure, and that's an interesting point as to exactly why that is. When we see more and more states legalizing marijuana, what do you think that's going to do just in terms of overall growth for the industry?
NOAH HAMMAN: I think it's going to make it strong. This year is looking to be up around 40%, probably close to $20 billion in sales. They're projecting double or triple that over the course of the next three years. Think about the states that legalized, Arizona, a big opportunity, New Jersey, huge opportunity.
And then think about the ripple effect. New Jersey now going legal, you've got to imagine New York and Pennsylvania is not going to let that revenue just flow to that state. They're going to probably be coming online soon as well.
ADAM SHAPIRO: I am curious, and I have to disclose that my family is invested in a small cannabis business in California. I have no involvement in it. I just wrote a check years ago. But one of the things I keep hearing from all kinds of people in that industry is that it really isn't going to pop until the federal government allows the banking, makes it simpler. Do you see that on the horizon?
NOAH HAMMAN: I do. I think it's, in part, why the growth, at least we saw in the US multi-state operators today, was a little bit muted, right. It looks like, at least as of now, you still have a Republican-controlled Senate. So the concern is probably nothing's going to happen on legalization, or decriminalization, or even descheduling.
But we think what could happen, and what the Republicans would support, is that Safe Banking Act that already passed the House. So if that happens, and I do think that's incredibly important because these companies need a good solid banking solution, it's just safer for the employees all the way around, I do think that can be passed. And then that's going to be a huge help.
It still blocks out Canada, so you really want to focus on the US multi-state operators, but they're going to be able to have better access to capital, cheaper access to capital. That's going to really help the space. But I think the muted growth you saw in those stocks today was because of where the Senate stands right now, at least as of last night.
SEANA SMITH: Noah, when you take a look at the investors that are interested in these marijuana stocks or interested in your fund, is it more so the retail investor? Or is it the first-time investor? Or the young investor? What are you seeing on that front?
NOAH HAMMAN: Yeah, very much so. It's retail investors. You're starting to see some financial advisors use it, but it depends on their broker-dealer platform as to whether or not something like our ETF or those stocks are available. But yeah, institutions, you know, they still, with federal-- you know, being federally illegal, you know, it makes it very difficult for big institutions to invest in the space. But you're seeing that, slowly but surely, private equity funds, more in the private space, investing in these companies, both private and public.
So I think until those things change, one, the space will be volatile, right. We love the space and think it's a great opportunity over the next decade. It won't be a smooth ride. This is sort of the early internet stages, think about it that way.
The good news is many of these US companies are positive cash flow, right, and generating revenues today. This isn't a startup opportunity. These companies are operating today, and as more states open up, it'll be great. But still, the growth is going to be, you know, not in a straight line.
ADAM SHAPIRO: All right, Noah Hamman, we appreciate your being here, Advisors CEO. Good to have your input on the cannabis industry, and we'll bring you back, especially when we have a new Congress to see if they do pick up the legislation you were just discussing.