Friday’s big rally in cannabis stocks following reports that the government may reconsider marijuana’s federal drug classification could signal the beginning of a new bull market, said Tim Seymour, founder of Seymour Asset Management. Officials told CNBC that President Donald Trump is expected to issue an executive order reclassifying marijuana as early as Monday. The Washington Post previously reported that President Trump is prepared to direct government agencies to move marijuana from a Schedule I drug to a less restrictive Schedule III drug. Seymour, who runs the Amplify Seymour Cannabis ETF (CNBS), said the changes could help banks and major U.S. exchanges get used to the industry without full legalization. That could pave the way for global institutional investors to start buying the stock. “Investors that are investing in cannabis right now have an absolute advantage over institutional investors, and when that comes in, it’s going to be powerful,” Seymour told CNBC Pro. “I make no guarantees,” he added. “But there’s no question that we’re still very early in the history of cannabis.” Seymour said the industry as a whole is trading at 1x sales and 6.5x adjusted EBITDA, which means it’s “very cheap.” He also noted that after Friday’s rally, the stock is still below August levels (when President Trump previously raised the possibility of reclassification), underscoring the potential for further gains. However, the failure of cannabis stocks to even return to their August highs may indicate that the market does not have much faith in the immediate benefits of cannabis reclassification. Take Tilray, for example. The stock was up more than 23% in midday trading Friday, but is still down more than 21% since the beginning of the year. TLRY YTD Mt. Tilray, Year to Date But Seymour said, “This time feels different.” That’s because the industry is lobbying Washington to fully understand the implications of the schedule changes, which include benefits such as tax relief and higher investment returns. Reclassifying marijuana would mean it would be classified as a steroid, including codeine, or a drug like Tylenol, rather than heroin or LSD. Seymour said people flock to Tilray, which is included in his ETF, because it is listed on the Nasdaq and is easy to trade. But he said the fund also provides investors with exposure to other U.S. and international stocks related to marijuana sales, including multi-state operators Trulieve and Cresco Labs. Seymour said some large investors may have a hard time understanding the true size of the market, given that there are currently both legal and illegal sales. But he said there was general agreement that the field was growing. “Even the most sophisticated analyst on the street probably can’t tell you how much ‘multi’ cannabis should trade at,” Seymour says. “But what everyone is sure of is that it’s a growing industry.”
