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hey welcome back to the daily dive today we're joined by tim seymour chief investment officer of seymour asset management but before we get into it don't forget like subscribe and hit that little notification bell hey tim welcome to the dive great great to be here sandra pleasure okay so let's start off talking about cannabis when you're looking at operators to invest in how do you go about your diligence i think for cannabis the driving uh i think you know fundamental that's that's been most important for the industry over the last couple of years has been has been balance sheet and and and bottom up uh i think first of all just you know to see what the the balance sheet looks like to see what the capital base looks like uh obviously there's plenty of other fundamentals within the sector that you know on a bottom-up basis you care about but i i think understanding really who who has uh the the runway to actually build a business in a high growth industry i think understanding the capital base has been important and then you know look obviously profitability so the income statement in big bold kind of financial terms balance sheet income statement both very important um and and profitability within the sector is is proven to be critical and essential uh over the last really 15 months or so before that i don't think anybody cared and it was really about growth at any cost and and pie in the sky but um if if the companies don't make sense fundamentally bottom up we all know what's going on top down it's an exciting time but a lot of a lot of money's been been wasted a lot of capital's been eradicated and i think investors need to spend a lot of time on the bottom up do you have a preference towards the size of an operator you invest in you know i my my investment kind of participation in the sector stems from being involved in private companies very early stage companies all the way through to the biggest public companies so uh i'm i'm somewhat agnostic although i'm not agnostic relative to the underlying product i run an etf uh cnbs as you can see behind me um and so we're we're obviously investing in some of the biggest companies in the space the listed ones and the ones that are federally permissible for us to to to invest in um on the hedge fund side in my jw asset management perch we're we're investing in uh you know new new stage companies uh although i'd say we're we're less focused on bc and angel round investing than we're really looking at companies um anywhere from yeah i mean series a to to you know later stage investment i think we we really care and i think as far as investing in cannabis um the opportunities for investors are across the spectrum the the industry is far from you know beyond the place where we still all feel like we're in the early stages but even for the most advanced companies the largest companies the ones that that you know the handful of those that are north of 5 billion you know those are companies that are also going through their next phase of investment and frankly some of those those re-rating moments and catalysts are things that are still ahead of us and make those companies very interesting as well how are you forecasting the cannabis regulatory environment playing out in the u.s under biden leadership uh it's i don't think it's going to move quite as fast as people seemingly have you know re-calibrated their expectations from the georgia runoff uh and where really we started the year on this the sense that now with with the democrat-controlled senate a uh you know a fast track to the scheduling to you know a a full federal environment or are things that can happen quickly but let's be really clear um the the last 12 months for cannabis in in in quick review include not only multiple new states coming online including conservative states in the u.s where there really wasn't the type of uh constituency within the senate historically to to even support uh the type of legislation that people might see coming through but um you've had an enormous change in in terms of what is the building block for getting cannabis to where most people within the industry want to see it go on the fully federal side the fact that the house voted to deschedule and for federal legalization even though that was going to be dead on arrival in the senate uh that was a very big moment in in 2020 and you know the number of other legislative advances i think for the sector are part of this this building block what what what's been clear through the dynamics around fiscal in the country and where cannabis clearly is getting a lot of of tailwind for legislation on a state-by-state basis because it is going to be this this source of found money for a lot of uh a lot of states but on even on a federal level at some point here um clearly that that's part of fast-tracking legislation so so look um some of the most important dynamics for investors in in the sector really more around the capital markets dynamics of of will the companies be able to uh properly bank access capital markets so therefore lowering cost of capital uh listing on the exchanges in the united states for u.s plant touching and and and obviously just to the extent that you're you're going to see this you know re-rating that might come with with big institutional investors come into the space i i think there's a possibility that that could come sooner than later and i think that's less complex than it is getting five or six federal agencies to work together to get legislation that really you know get get get where we want to go i i think the sweet spot for investors may be before federal frankly um but maybe where if if you were to get the exchanges to get the capital markets dynamics solved and you could have just the prospect of the companies that are here now and the growth and you bring in more institutional capital uh before the fda and the dea and fincen and the irs start to screw it up um and make it a lot more complicated and and not as straight of a path for companies i think you know that's that's something we should all think about so we have to ask you about beverages do you think this will be an emerging category at some point yeah i mean i think it has to be i it's hard to know what adoption will look like in the beverage space i i think especially when we're looking at different form factors within the you know the thc space evolve in somewhat predictable and non-predictable ways that flower is still where the the the dedicated consumer is focused um but concentrates uh and you know edibles and and uh obviously you know you know the vaping dynamics changed in the last 18 months although i think you know that's going to continue to uh to grow as a category again especially as uh we get a little bit more clarity on on some of the things that are holding it up but um i i think beverages are an exciting area of growth i think ultimately the the consumer is not exactly sure how to deal with with thc infused beverages in a bar setting or at home or you know i think socially we're all kind of evolving on the fly here um i think the uh the focus within the the the core operators right now or some of the larger players or or at least u.s players with a footprint and and where you know beverages could at some point become part of it again um some big issues with the fda right now but but i do think that that it's a segment that's certainly very exciting um and we'll see where consumer tastes go i own a bar in manhattan downtown so i you know i i kind of hope that the uh the cannibalization doesn't completely change the way the spirits industry operates um kidding but not kidding um i do think that that as a segment it's it's going to grow it's hard to know where the market is going to take it but um there's no question people are going to want to consume these beverages and and there's no question that these beverages will be look i i drink coors light because i like to micro dose right when i drink and and yeah i can drink ten of them and and i think that's again you know does somebody want to uh be drinking a thc infused beverage that's their equivalent of a light beer do they want something that's a heavy hoppy beer you know these are things that i think we're going to figure out so what do you think some of the biggest myths are that cannabis companies tell investors or you hear from investors when they talk about the cannabis sector biggest myths are that you know they have a brand maybe everybody says they care about brands it's not that they don't care about brands but the question remains as to really what is the brand and and who has a brand at this point and is the brand the product is it the retail footprint is it the the distribution form is it um you know ultimately is it is it actually the uh you know the growth process and and and the quality of the grow i should say so so i i think be careful when someone tells you that we are the brand we are one of the biggest brands we are you know a well-known national this national that um i think i think that's part of it i think the the the competitive landscape is still very difficult to know so we just got done talking about federal trends on legislation um i don't think anyone who's got a a uh a well-established certainly an integrated cannabis business the united states is all that excited to see a full federal uh environment and also one where obviously interstate commerce is going to be wide open so i think the moats around a lot of these businesses are still uh not entirely clear even though some may look pretty clear right now especially in limited license states um so i think you know some of the some of the misperceptions just for investing in in the industry are that your your investment returns are a function of the best fundamentals and and i think this is no different than investing in other sectors i i come at investing in cannabis from being an emerging markets investor and investing in in in parts of the world where at times they were also very illiquid marketplaces there was a lot of federal restrictions or or national restrictions or foreign restrictions on capital where there were young immature companies um sounds a lot like cannabis so um the point is that that you know i feel like i've seen evolution of new and emerging asset classes of which cannabis has won and that the the returns are sometimes a function of the top down the bottom up and then the technical factors around where is money going to flow and how can money flow so um i think that's you know that's very important i think investors really need to do their work on understanding um who is you know who they are investing in and whether they're investing in a fund whether they're investing in a particular company we've talked a little bit about that but but that ultimately you know what what is the what is the advantage in the edge of of of that fund manager or um that entity in in in being well positioned to not only understand the top down make asset allocation choices for the bottom up find the best companies you know know the ceos no know the uh the industry players and then know where the capital is going because i think that's that's part of it too what everyone who's been following cannabis for the last three or four years knows is that the uh the dynamic between canada and the us have had a big big uh you know determination on on who's made money and how people have made money and at times you know when to trade one against the other and and uh um i think investors need to really pay attention to that stuff so being in new york where institutions generally frown upon investing in cannabis do you have any sense of how the conversations have changed since biden and the democrats took control i think that the conversations changed for uh institutional investors in new york or the east coast or really you know almost anywhere i mean i have to say that institutions uh care a lot more about i i don't think there's really an approach to investing that's based upon a political view or whether they are believers in the industry and there's always going to be some question and debate over the size of the industry and the inherent profitability in the industry but but i think most importantly investors are more concerned about what can i invest in do do i want to be allocating any capital here when i have still some risk of reprisal whatever that might be but i have a fiduciary responsibility depending on who my investors are whether they are a pension fund or or an endowment or or just institutional investors that are funneling into a uh a us institution on on their behalf those i think are the biggest issues so for for new york based institutions so whether it's you know folks working on midtown you know biggest hedge funds in the world and i think a lot of them have already made allocations to cannabis i don't think uh again i i tend to think that the the perception changes that have come in the industry some of them have come because the sense was that the political climate was so much more advantageous so therefore that brought institutional investors on board um i i don't think that the perception change or the institutional uh interest in in cannabis is really the change in in the white house caught people's attention uh in terms of what it could mean for the timeline for the industry to continue to to to find this federal re-raiding path but um i i you know i feel like there's a lot of institutions that have been also just waiting for the size of the industry to grow remember institutions sometimes have capacity constraints they have a lot of capital uh to get through the funnel so to speak and and it really has been kind of a funnel so i think they're waiting for capacity i think they're waiting for proven operators um you know traditional institutional investors are less uh risk tolerant than family offices and and private banks and ultra high net worths or high net worse who have been the early stage investors in cannabis so i think those are those are the things to watch okay last question here tim do you have any uh investments in the psychedelic space um i don't have any investments in the psychedelics i will say that that i i think the the the world of health care uh but but but you know mental uh mental health uh and innovation in that sector from a treatment and the you know biopharma perspective is is a fascinating area and an area that already has had a big move uh a lot of people assume it's a similar group of investors that are that are investing in cannabis that might be investing in the psychedelics um you know i certainly know a handful of the companies in the space and i i think they're they're well on their way to some you know the next the next phase of of possible either strategic participation in the sector from the biopharma perspective clearly there there is this um you know a lot of these companies behave much like biotech stocks and that they're pre-revenue um they have uh potential you know multiples on them that might not make any sense right now but but they also don't make a lot of sense for a lot of biotech companies so um i think it's a fascinating area and i think the you know if you look at even the gw pharma uh jazz pharma transaction it shows where uh you know the complementary nature that cannabinoid science plays for a neurological platform and and uh pipeline at jazz it you know tells you where i i think you know bulge bracket pharma biotech are going to also go in in other areas so cannabinoid science for sure um in the psychedelics and and you know mental innovation and treatment for uh for various types of mental health issues i think is is picking up steam not you know not a flash in the pan so uh exciting times for those those companies as well well tim thank you so much for joining us on the show and sharing your insights with us today my pleasure great to be here and for our viewers at home don't forget to like subscribe hit that little bell you can follow us on all of our social media platforms they're listed below i'll see you next time on the dive to talk all things small caps