Daily Mail

ROLL UP FOR HIGH RETURNS? CASH IN ON CANNABIS CRAZE

- Justin Urquhart Stewart Justin Urquhart Stewart co-founded fund manager 7IM and is chairman of investment platform Regionally.

WHAT’S HAPPENING?

i CAN almost hear the ‘harrumphin­g’ from the shires that we are even considerin­g the possibilit­y of investing in marijuana. however, the fact is we can invest. What we need to consider is whether we should.

There are two categories of cannabis products. First, there is medical marijuana. Currently this is broadly legal in 35 US states, with New Jersey shortly to be added. Additional­ly, you can include more than 30 further countries. Typically this would be by prescripti­on only for the treatment of anxiety, depression, pain and stress.

Secondly, there is recreation­al marijuana. So far 15 US states have legalised it for adult use, including the political centre that is the District of Columbia. it has been legal in Canada since October 2018 and in Uruguay since 2014.

WHY DOES IT MATTER?

SiMPlY, this is a relatively new investment area with known demand, limited current capacity and some interestin­g opportunit­ies. We should split this market into three areas to better understand the businesses.

One segment is composed of the cannabis growers and retailers. Another is made up of the biotechs that develop drugs. Then finally there are the companies providing ancillary products and services. These companies support growers with products and services such as hydroponic­s – growing plants without soil – and lighting systems.

WHAT SHOULD I DO?

The global market for the legal cannabis trade is valued at £13bn and growing. One sign of growing interest was the $7.2bn takeover of British-based GW Pharma, which makes cannabis-based medical treatments, by rival Jazz Pharmaceut­icals.

The sector is certainly fashionabl­e. David Beckham’s company, DB Ventures, has a stake in Cellular Goods, a cannabinoi­ds company whose initial public offering was 13 times over-subscribed.

Others will follow and some of them will go up in smoke – but that goes with the product, i suppose. Please remember that this year’s fashion fad is next year’s tank top. This shows all the signs of a sector which will attract some very high risk and low quality businesses.

ANY SUGGESTION­S?

ONe company to consider is Canopy Growth, listed on the NASDAQ market in the US, which has grown successful­ly, operating through well-regarded brands.

Then back here there is MGC Pharmaceut­icals, a medicinal cannabis company. its areas of scientific interest lie in developing treatments for epilepsy, Alzheimer’s and Covid-19-infected patients.

The share price is up 180pc since listing in london recently, but it would seem to have longer term attraction­s as it builds credibilit­y ahead of the competitio­n.

For a less risky approach there are now a couple of london-listed exchange-traded funds, Rize Medical Cannabis & life Sciences eTF and Medical Cannabis and Wellness eTF although both have jumped 50pc and 46pc respective­ly so far this year. high risk, high return – or maybe just high?

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