Exclusive Interview with Tim Seymour, CNBC’s “Fast Money” Co-Host, Portfolio Manager of the Amplify Seymour Cannabis ETF CNBS and CIO of Seymour Asset Management
“Fast Money” co-host Tim Seymour last spoke with New Cannabis Ventures in 2019. Since then, Seymour, also CIO of Seymour Asset Management, has launched a cannabis ETF and has continued to be a thought leader in the cannabis space. In his chair at CNBC and through his involvement in the cannabis investment space, Seymour has watched the industry evolve over the past three years. In 2022, he checked in with New Cannabis Ventures to talk about the Amplify Seymour Cannabis ETF (NYSEARCA: CNBS) and share his insight into the investment landscape.
Listen to the entire interview or read the summary below:
The CNBS ETF
Seymour partnered with Amplify ETFs to launch CNBS in 2019. He knew one of the founders, and he liked Amplify’s approach to specialized and thematic products. Seymour has spent most of his career in emerging markets, a background that piqued his interest in cannabis back in 2015 and 2016.
More than 80 percent of the companies in CNBS generate at least 50 percent of their revenue from cannabis, or the companies are cannabis-related ancillary businesses. Seymour is looking for exposure across the cannabis supply chain, which means looking at plant-touching companies, vertically integrated companies, technology companies, ancillary companies and real estate. From a geographic perspective, the ETF recognizes the U.S. as the largest cannabis market in the world, but that doesn’t necessarily mean it is avoiding exposure in Canada and Europe, according to Seymour.
The fund has approximately $70 million in assets. While the past 15 months have been a difficult period for cannabis, the ETF has managed to not to lose units, according to Seymour. The fund’s AUM peaked at approximately $160 million. It has managed to hold on to a fairly sticky investor base, according to Seymour. He is excited to see assets recover as the industry evolves.
Seymour considers himself a generalist. He takes the approach of finding the companies in the cannabis industry that are growing and taking market share and the companies with the best management teams, balance sheets and geographic locations. He spends time visiting companies and meeting management teams to understand how businesses are developing. Seymour also focuses on market dynamics to understand liquidity, changing risk tolerance and the outlook for the institutional adoption of cannabis.
In the Chair at CNBC
In addition to his work with CNBS, Seymour also goes on air with CNBC’s “Fast Money.” Seymour acknowledges that there has been frustration within the cannabis industry regarding CNBC’s coverage of the space. But Seymour sees the financial media’s understanding of cannabis growing. He aims to lay out of the investment thesis for the industry in the short-, medium- and long-term. Cannabis is still under-followed, according to Seymour, and he hopes to continue highlighting the growth and the headwinds in the industry.
As an active investor, Seymour has to balance that role with his time on air, which means disclosure is essential. He discloses all of the stocks he owns, cannabis or otherwise. While cannabis is not the sole topic of discussion while he is on air, he will mention if a cannabis company is in his ETF. He approaches cannabis conversations like any other high-growth, high-risk asset class. He discloses everything with the hope that viewers can judge for themselves.
Seymour’s visibility on air sparks a number of conversations. He knows people in the institutional investment world, including investors his ETF. Seymour is seeing a broadening of the cannabis investor base, which has long been sought after in the cannabis space. It will become easier for these institutional investors to enter the space once more exchanges are able to list cannabis companies, but the interest is there today. Seymour expects the true turning point for cannabis will be when not just dedicated cannabis institutional investors are active in the space but when consumer discretionary, pharma, retail and technology analysts enter the industry.
Cannabis Investment Outlook
Capital market access and the federal regulatory environment are two of the major macro-level factors affecting the cannabis industry. Seymour also pointed to the importance of margin profiles in driving price action for cannabis stocks. The investor analyst and pundit community is concerned about where cannabis gross margins and EBITDA margins will settle, according to Seymour.
Many of the same issues the industry has dealt with in the past, including supply issues, taxes and the illicit market, will persist as the industry enters Q1 earnings season. Seymour expects to see flat or even small sequential declines in Q1. He also anticipates that the industry will reach an inflection point in the second half of the year with revenue starting to trend back upward in Q3 and Q4. States in the northeast, such as New Jersey, New York, Connecticut and Maryland, could be higher margin states, according to Seymour.
Market dislocation is also a factor in cannabis, but that could be an opportunity, according to Seymour. More institutional players could recognize that dislocation and find attractive opportunities.
Regulatory progress at the federal level remains a sticking point. The current political dynamic makes progress difficult, but Seymour is encouraged by the bipartisan support for cannabis research legislation that passed the Senate. The legislation could start a meaningful dialogue about the benefits of cannabis.
While cannabis companies would undoubtedly benefit from the tax and capital markets relief that would likely come with federal legalization, Seymour sees the companies that are competing in today’s challenging environment deepening their moats, giving them advantage when the market does finally open up.
Interest rates, inflation, supply disruption and COVID-19 remain headwinds in the cannabis industry, but Seymour expects to see some stabilization in margins and continued top-line growth in the short-term. Cannabis is not the greatest trade or the easiest trade, according to Seymour, but it does represent a significant opportunity in growth, as well as social change
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