CANNAINVESTOR Magazine July 2017 | Page 245

not invest in those same issuers and/or to what it will provide exposure.

Eventually, there will very likely be a cannabis ETF in the United States. The question that investors need to ask is if waiting for that U.S. launch, will they be missing out on a crucial period of rapid growth of the medical marijuana industry, particularly in Canada.

Are the Canadian cannabis companies over-valued?

From a fundamental and traditional valuation metrics perspective, there’s no question that the Canadian medical marijuana producers have high valuations.

This is really an almost unprecedented scenario, where a completely new industry is being created. While the revenues may not support these current valuations, there is a consensus that the revenue opportunity is massive, particularly if these stocks become the primary producers of recreational marijuana.

For instance, Deloitte Canada estimates that potential revenue opportunity for marijuana-related business activity in Canada, if we include legal recreational use, could be anywhere from $5 to $9 billion CAD per year in Canada alone.

Right now, as rich as valuations are, they are not close to fully accounting for that type of revenue potential.

Should we expect to see a cannabis mutual fund by someone else?

Yes, for sure. As the industry grows and the stocks grow in size, it’s inevitable that you’ll see more investment funds, both mutual funds and ETFs, coming to market to provide investors with different choices for investing in this growing industry.

What would be the difference between a cannabis ETF and a cannabis mutual fund?

They would likely have very similar product structures. However, an ETF trades throughout the business day on a stock exchange, similar to a stock, and generally charges lower management fees than mutual funds, which can only be purchased and sold at an end-of-day price.

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