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Aug 27, 2018

Cannabis firms 'worth nothing' right now, portfolio manager warns

‘Right now they’re worth nothing’: Why this portfolio manager still won’t touch pot stocks

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As cannabis stocks soar after BNN Bloomberg’s report that U.K. alcohol giant Diageo Plc is scouring Canada for a marijuana partner, one Toronto-based portfolio manager is sticking by his call to avoid investing in the sizzling sector.

In an interview with BNN Bloomberg, Barry Schwartz, chief investment officer and portfolio manager at Baskin Wealth Management, called the market valuations of some Canadian pot stocks “unbelievable.”

“I’ve seen this before in 2001 when I missed the internet stocks, when they went to multibillions of dollars and they all imploded,” Schwartz said Monday.

“At the end of the day, these companies have to make money. They have to stop diluting shareholders. God knows when that’s going to happen,” he added.  “You run the risk of big trouble if these companies start getting valued what they’re worth – because right now, they’re worth nothing.”

This isn’t the first time Schwartz has warned about the frenzy around marijuana stocks. In November 2017, the portfolio manager cautioned investors: “You’re going to lose all of your money if you invest in these companies.”

Since then, shares of Canopy Growth have soared 220 per cent, and have nearly doubled in the last eight trading sessions in the wake of Constellation Brands Inc.’s announcement that it was investing another $5-billion for a 38-per-cent stake in the Smiths Falls, Ont.-based marijuana producer. Its market valuation stands at nearly $13 billion, based on Friday’s closing price of $58.62 per share.

On Monday Schwartz said marijuana stocks are the types of investments his wealth management firm can’t buy for clients.

“They don’t make money, there’s no fundamental analysis to be had,” Schwartz said. “They’re in the realm of speculation and I’m not in the venture capital business.”

For investors who insist on investing in cannabis stocks, Schwartz advises them to buy "a little bit – and don’t lose your whole portfolio on these investments." 

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