He’s made millions in the oil patch, but investor Brett Wilson has some advice for those three decades his junior: stay away from one of the two currently hot sectors.
On the surface, cannabis and blockchain have at least one thing in common: they’re the two hottest sectors of the Canadian markets over the past year. But dig a little deeper and you’ll get differing opinions on where to place your hard-earned investment dollars. Both are risky for the new investor, says well-known deal-maker, Brett Wilson, who claims that if you’re really itching to play, pick cannabis over cryptocurrencies.
It’s been quite a ride for the markets the past week, with volatility being the name of the game, as markets worldwide try to find their comfort zone after years of record-breaking gains. Anyone familiar marijuana and blockchain stocks knows all about those ups and downs, as both sectors saw companies emerging almost out of nowhere over the past two years, winning big financing rounds while posting huge gains. Stock prices in both spaces have been taken down a peg over the past month, though, all of which to many speaks to the sentiment-driven nature of investment in the two spaces.
What’s a new investor to do? Wait and see, says investment banker Brett Wilson, chairman of Canoe Financial and former dragon on CBC’s Dragon’s Den, who argues that both blockchain and cannabis need to develop more before clear winners and losers can be found —but stay away from cryptocurrencies altogether.
“You need to understand blockchain, you don’t need to own cryptocurrencies. That’s my first message in terms of millennial investing,” says Wilson, to BNN. “And long term, I actually believe that the cannabis markets will settle out, once we have metrics. We don’t have a lot of sales and we don’t have operating income. We don’t have all of the things you need. It’s still early stages, but unlike [the dot-com bubble], I think there’s a real business behind all of this.”
A lot of money has already been invested in cannabis, even though we are still months away from a realized recreational marijuana industry gets up and running. Currently, there are five pot companies with market capitalizations over $1 billion, along with dozens of others attracting significant investor interest.
“You’re looking at where the quality [marijuana] producers are,” says Wilson. “I’m really focused on the people, and it comes down to the people that you can trust.”
“I would not as a novice investor be chasing certainly the bitcoin and cryptocurrency world and I would probably stand on the side and watch how cannabis shakes out,” he says. “There will be better trading multiples, better trading metrics, better comparables as the year comes. There’s a lot of excitement over the fact that we’re getting legalization around the corner, but there’s a lot of people tripping over each other. It’s not for the faint of heart and it’s not for the early-stage investor.”
As to the potential market size for the new cannabis industry in Canada, Wilson believes that the popularly assumed $5- to $8 billion-dollar range is too conservative. “I talk to [marijuana producers] and they say we’re supply-constrained. We cannot meet the market that they see … of $10 to 15 billion,” he says. “I think the market is considerably larger than the forecasts would suggest.”