Canopy Growth Corp. and other Canadian pot stocks are still cheap, this U.S. investor says

But with nine US states plus the District of Columbia having now legalized rec cannabis, Americans are wondering if the Canuck pot stocks are a good investment. Definitely, says Tim Seymour, “Fast Money” trader and managing partner for Triogem Asset Management, who says that the high valuations currently held by stocks like Canopy Growth Corp. (TSX:WEED) and Aphria Inc. (TSX:APH) should not hold anyone back.

“This is a very real industry, a global industry probably worth US$200 billion when you consider recreational, medical, wellness and lifestyle,” Seymour told CNBC. “What’s going on in this country is that this in not a red state/blue state issue. 64 per cent of the people in this country would like to see marijuana legalized. We know what’s going on state-by-state: massive, massive revenue for the states. This is becoming a very big issue for the states and a big political football.”

Seymour argues that a number of social factors are coming together to push the cannabis agenda forward in the US.

“We know about the opioid crisis in this country — there’s no question that marijuana has proved to be alleviating a lot of the pressure and taking a lot of people off of these horrible drugs and putting them on things that are not as addictive. [Cannabis] is not addictive at all; this is not a gateway drug,” he says. “Veterans are clamouring for it and that becomes a political football as well.”

Seymour claims that there are forces in the US for and against decriminalization and legalization, with much of it coming down to money. “[Marijuana] is a social lubricant, when you think about the substitution of recreational cannabis for alcohol. Who are the people that are fighting hardest to keep cannabis scheduled as a drug that should not be allowed to be legalized? It’s Big Pharma, it’s Big Alcohol,” he says.

As far as the pot stocks go, Seymour is bullish on Canopy, Aphria, British biopharm company GW Pharmaceuticals and Markham, Ontario’s Medreleaf. When it comes to valuations (Canopy Growth, for example, currently has a market capitalization of C$6 billion, and yet its most recent quarterly financials listed revenue at C$21.7 million and adjusted EBITDA of negative C$7.1 million), Seymour says it shouldn’t be a problem.

“Ultimately, with any growth company, you have to look at what their investment is in their growth for next year and the year after that,” he says. “Some of these companies are not worth some of the valuations that investors are paying, except for the fact that these companies are reinvesting, and it’s a land grab, not just here: Canadian companies are buying assets in the US and in Germany and in Uruguay and in Australia. So in a growth industry, you can make sense out of valuations whatever way you want to.”