Hedge funds, investors and mutual funds are piling in after Canada allowed recreational usage
The need for weed: why Wall Street is getting hooked on cannabis
Wall Street is developing a bit of a drug habit.
Nelson Peltz, the veteran activist investor, signed on this week as a strategic adviser to Aurora, a Canadian cannabis producer, picking up a load of stock options in the process. News of the appointment sent Aurora's New York-listed shares up 14 per cent, bringing gains for the year to more than 80 per cent.
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The challenge now for investors is how to see through the haze to sort winners from losers.
Plenty of start-ups will founder, said Bruce Linton, chief executive at Canopy Growth, a Canadian cannabis producer. His company — stock ticker WEED, and based in an old Hershey chocolate factory in the small town of Smiths Falls, Ontario — has a market capitalisation of C$21bn (US$15.7bn), on sales of C$147m over the nine months to December.
"Google came out of [the dotcom boom], but so did a bunch of other companies that disappeared," said Mr Linton.
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Insiders point to cannabis as having a multitude of untapped applications across several industries including pharmaceuticals, packaged foods and beverages as well as cosmetics and beauty.
Last year Altria, the tobacco company, took a stake in Canada's Cronos Group, and Corona beer maker Constellation Brands invested in Canopy. Vancouver-based Tilray, meanwhile, formed partnerships with AB InBev and pharmaceuticals group Novartis.
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Still, many are optimistic. Cowen, one of the few US-based investment banks doing cannabis research, says CBD can "conservatively" generate sales in the US of $16bn by 2025
"You don't get an opportunity every day to participate in the very early stages of the creation of a large global industry and that is what is happening now,"
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