Cannabis stocks had an intense year in 2019. During Q1, most listed companies reached all time highs on rosy revenue projections for the fiscal year. But since March, most blue-chips have dropped an average of 60-70%. Realized revenues were far from what investors expected. More than one CEO was forced to step down as investors, such as Canopy Growth’s Constellation Brands, demanded solutions. The question on everyone’s mind is the same: what’s in store for 2020?
Analysts at prestigious Wall St. firms are starting to issue buy recommendations at current valuations, and 613 Partners agrees this is a good time to buy the dip. If you believe in the long-term success of the cannabis industry, and factor in how young and immature the sector is, cannabis investments should be able to return healthy profits on a long hold strategy. The days of exponential returns on buy and flip assets may have gone by, but that doesn’t mean there is still not an enormous growth potential in the global cannabis market.
Our vision is that developing markets like Latin America and Africa will continue to outgrow North American and European jurisdictions, particularly in the cultivation segment. As cannabis markets mature and the plant continues to commoditize, producers with a competitive cost structure will be increasingly gain the investment war. Colombia and Peru are currently our preferred investment destinations, and we are closely monitoring legislative developments in Mexico. Brazil is the region’s sleeping giant, and it has also signaled a move in the right direction. We also expect some Eastern Africa countries like Kenya and Uganda to step up the game to their neighbors in the South.
As demand in high purchasing power markets like Europe and North America continues to expand and regulators worldwide continue to polish their local rules, we expect 2020 to be the year of the cannabis industry’s graduation from a bitcoin-like gold rush to the establishment of solid foundations upon which the industry will kick off a decade of sustainable growth.