Genevieve Roch-Decter

Market. The Russell 2000 is breaking out to long-term highs. Canada’s Venture is also breaking out after a 3-year consolidation pattern. This is inconsistent with the idea of selling in May and going away. The underlying basis for growth in Canadian securities is from the cannabis industry. The first wave of growth came for domestic medicinal consumption, but now there is a growing international market and there are strong institutional investors.

Comment on the valuation of cannabis stocks. A caller asked whether cannabis stocks are currently overvalued. Marchand responded that there is a large black market for cannabis and the legal cannabis companies will take share away from them. Roch-Decter pointed out that several large-cap cannabis companies, such as Aurora, are using their highly valued shares to buy other companies. The agriculture market trades at 1x revenue. Cannabis companies trade at 4X, which she does not consider sustainable. Over the long run, the cannabis multiples will retreat to more normal levels and the smart companies today are highly acquisitive. She recommends holding a smaller midcap that will be swallowed by one of the larger companies or one of the larger companies that is getting international licenses.

Comment on cannabis supply. There is already substantial supply of cannabis in Canada via the black market. One question is how much of that market will switch over to consumers buying their recreational supplies in the legal market. She does not believe that Canada will, initially, be oversupplied. In addition, the legal cannabis sellers are focusing on the high end market. In Colorado, about 37% of the market is edibles and other ancillary products. She believes that as the government moves to allow these in Canada over the next year, this will also solve oversupply issues.

Comment on connections between crypto and cannabis. Roch-Decter noted that there are two privately-held companies in BC that use the excess power from their crypto-mining operations to grow cannabis. This is the perfect intersection of both sectors. Both sectors have trouble playing with traditional financial institutions, so they have that in common too. Marchand says that cannabis producers are interested in, or using blockchain technology in their business, but blockchain is a tool for them, not something that changes the industry.

Comment on the crypto market. Question: Could this be like the 3D printing market, which attracted huge interest a few years ago but now that 3D printing is here, one doesn’t hear much about it? Response: Crypto blew its top with $20,000 on bitcoin and everyone wanted into it. Over the past 6 months, the pattern has been lower highs. There has been a fog over the regulatory space, and some serious hacks, creating a tug-of-war between the bulls and the bears. Last week, the US Securities and Exchange Commission said that Ethereum is not a security; it is a commodity. By clearing this up, the SEC provided some additional certainty in the market, which favors investors. The crypto market is still only $300 billion, which is not much. There is a lot of room to grow.

This is the leader in the cannabis space when it comes to size and scale. Its price is back to its market high. Market leaders command a higher valuation. There is strong international interest. Marchand has been working with Live Well, a new company focused on Ontario and Quebec. She said that it brings the expertise of Canopy in a smaller and less expensive package. This has been given conditional approval to trade on the Venture exchange and is going public.

They are focused on the medical market in Columbia and more generally in Latin America. They are positioned to be one of the first Columbia-based companies to have product in the domestic market. Their CEO used to manage infrastructure projects for SNC. The other co-founder launched Advil into the country. Another executive has years of experience in the US Drug Enforcement Agency. This is a knowledgeable management team. They plan to replicate their model of doctor engagement throughout South America and Mexico.

Einstein Exchange is one of the easiest ways to buy Bitcoin or Ethereum. They are the fastest-growing exchange in Canada. They are larger than Coinsquare. Their fees are transparent and their management team have built two other fintech companies and have strong relationships with traditional financial companies.

In the crypto world, you have proof of work and proof of stake. (See https://hackernoon.com/what-is-proof-of-stake-8e0433018256 for a readable explanation.) Dash is a top-ten cryptocurrency that is based on proof of stake. One can think of this as a faster Bitcoin. This is a way for retail investors and other brokers who cannot own crypto directly to have exposure to this ecosystem. Fidelity is one of their biggest investors. This is a good stock to own given its recent pullback.

This company has operations in California, Nevada and New York. They recently announced the acquisition of a Florida license. They call themselves the Apple stores of cannabis (fancy stores). This is the first billion-dollar US company to be listed. There have been several catalysts recently in the United States. For example New York state’s Department of Health recommended that anyone with an opioid addiction be allowed to access cannabis as an alternative, and generally recommended legalization of recreational cannabis. The opioid crisis affects 4% of the US population, so this presents a large opportunity for cannabis sellers.

Comparable to Medmen Enterprises. American-based sales of legal cannabis, with operations in six states, including the 48 million people of Massachusetts, Florida and New York. They have one of the 10 licenses in New York and one of the 13 in Florida. This is one of her largest holdings. Â There have been several catalysts recently in the United States. For example New York state’s Department of Health recommended that anyone with an opioid addiction be allowed to access cannabis as an alternative, and generally recommended legalization of recreational cannabis. The opioid crisis affects 4% of the US population, so this presents a large opportunity for cannabis sellers. This company locates is dispensaries in prime areas.

Hiku is a combined company resulting from the merger of TS Brandco Holdings, Inc. (Tokyo Smoke) and DOJA Cannabis Company. Tokyo Smoke is a set of stores across Canada. Hiku is now merging with WeedMD (WMD-V), which focuses on medicinal cannabis, especially for seniors. Marchand sees a lot of complementarity in the merger and also sees potential in Ontario because the Ford administration is talking about changing Ontario’s dispensary model, which might give Tokyo Smoke a head start in this large market.

This is an aggressive buyer of other companies. They are partnering up with the liquor commission in Alberta and will command a higher premium for their favored access to that market.

This was the first cryptocurrency miner to go public, via a reverse takeover. They are based in Iceland and expanding to Sweden. These are low-cost power jurisdictions, which gives HIVE an advantage. They have a great management team. The stock has been under a lot of pressure. The downside might be another 30% but long term, these are great assets to own. (Analyst’s price target is $3)

They have had several management issues, including an interview with the CEO by the Globe that the company disavowed. The Ontario windstorm hurt their crop. These issues have depressed their stock price and may make the company a takeover target. The company does business in Europe as well as Canada. Marchand recommends waiting to see the company execute on the milestones it has set.