Investment advisor Edward Jones issued a report on the Canadian marijuana market that is surprisingly devoid of information on the Canadian marijuana market. The three-page report titled The Canadian Marijuana Market Heats Up, but Investments Carry Risk and written by analysts Ashtyn Evans, and Brittany Weissman portrays an industry akin to the Wild West, with low barriers to entry and a lack of regulatory approval. Most egregiously, the paper fails to mention even one of the many actively traded cannabis companies currently in the market today.
Dividing their report between the medical and recreational sectors, Evans and Weissman begin by noting the relatively small nature of Canada’s medical marijuana market. Using a misleading comparison that shows medical marijuana revenues as a paltry $300 million next to big pharma’s $25 billion, the authors attempt to discredit the progress made in the past few years. Furthermore, the paper ignores the industry’s gains over just the past year, opting to scare investors by calling out the “limited operating history” of Canadian cannabis.
“While the recreational market is expected to be larger than the medical market, significant uncertainties exist. As with most new, growing markets, we believe the excitement over the marijuana industry will eventually fade,” the report states. “Given the low barriers to entry, we expect competition to increase, and with the rapidly changing market dynamics and regulatory scrutiny, it is difficult to assess who the handful of winners and many losers will be.”
In other words, this marijuana thing is just a fad - like the internet, and television, and that newfangled telephone machine all the kids are using.
As reported ad infinitum, the legal cannabis market has grown exponentially over the past year. The North American Marijuana Index increased 41 percent in November, with the Canadian constituents gaining 52 percent alone. Analysts and experts alike predict that Canada’s cannabis market will bring in $4.1 billion in annual sales. To ignore the industry’s growing pains would be foolish, for sure, but the report by Edward Jones does nothing but willfully ignore the facts at hand.
In conclusion, Evans and Weissman offer recommendations to their clients that would baffle the average follower of the cannabis stock market.
“Given the size of the marijuana market, if any of the health care or consumer companies we currently recommend became involved in the industry, we do not believe it would be a meaningful part of their business at this point. For exposure to medical innovation in the biopharmaceutical subsector, we prefer drug companies that are diversified by product, geography and have extensive operating history and experience bringing drugs to market.”
The duo then goes on to recommend Johnson & Johnson, Merck & Co., Pfizer, Saputo, Mondelez International, and Philip Morris International to investors as top picks for the Canadian cannabis industry. Nowhere in the report do they mention Canopy Growth, or Aurora Cannabis, or Aphria Inc., three companies with market caps over $2 billion.
Edward Jones, the company that makes sense of investing.