The defeat of cannabis stocks could be the catalyst for the pot business's next big deal, says investor

The pot stocks continued their rout Tuesday for six days due to the shortage of supply in Canada, creating a favorable environment for the next big investment in space, according to an investor.

Aurora Cannabis Inc. lost up to 15% in its US commercial debut, Canopy Growth Corp. lost 12% and Tilray Inc. fell by up to 18% due to the general weakness of the market. This worsened a series of declines that began a week ago, one day before Canada's legalization of marijuana for recreational purposes, on October 17.

Investors appear to be disappointed by the lack of inventory, with several stores and websites running out of products in the early days of legalization, as well as lack of brand awareness, said Charles Taerk, chief executive officer of the company. Faircourt Asset Management, a Toronto-based company, said: manages $ 50 million in the $ 50 million ITU Alternative Health fund.

Canadian cannabis retailers have sold about 46% of the potted products, said Vivien Azer, an badyst at Cowen, based on a survey of online retailers in five provinces. At the same time, more than 95% of customers surveyed in four provinces last week were not aware of the brands they had just bought, according to the GMP Securities badyst, Martin Landry.

"We thought the sector was going to weaken at the beginning of the month as we entered on October 17 and we were a bit surprised that the markets remained quite buoyant until early last week," he said. said Taerk in an interview, adding that his fund is currently 23% cash. "Not to say that a correction is still late, but we were ready to a certain extent to a weakness."

Investors should not rush to sell their badets, said Taerk, especially since the sector's weakness could lead to the next big investment in space, like Constellation Brands Inc., which bought Canopy in August, after two months of decline.

"It did not happen like magic, Constellation watched us," said Taerk, who likes CannTrust Holdings Inc., Organigram Holdings Inc. and Aphria Inc. "They will not invest when companies negotiate at any record time. "

The lack of inventory of cannabis pots in Canada is not that bad, and should be a modest advantage for Canopy and Tilray, the two largest public cannabis companies, said Azer.

About 56% of Canopy Growth's 144 available products were depleted in Azer checks, while Tilray, which is not licensed to sell cannabis products in three of the five provinces she interviewed, recorded a sales rate of 64%. his 22 products. Azer carries an equivalent-purchase rating on both shares. Aurora Cannabis and Aprhia also had high stockout rates.

Bloomberg.com