Tim Seymour On Running A Cannabis Fund: 'We Focus On Companies Poised For Growth'

Tim Seymour, portfolio manager of the $CNBS Amplify Seymour Cannabis ETF CNBS, is renowned for recognizing the potential of the cannabis sector early on. In an exclusive interview with Benzinga Cannabis, he discussed the critical role of strategic partnerships in expanding market reach, the importance of operational efficiencies in improving gross margins and the potential of the U.S. hemp cannabinoid market as a burgeoning and legally complex segment poised for substantial growth.

These insights are vital for investors looking to understand the dynamics that drive profitability and growth in the cannabis industry.

“Cannabis sector growth continues to exceed expectations, particularly as regulations begin to soften worldwide. This shift is creating significant investment opportunities,” Seymour told Benzinga. He underscored the dynamic nature of the market, fueled by regulatory changes that often catalyze growth and investor interest.

Investment Strategy And Portfolio Management

In managing the $CNBS ETF, Seymour employs a selective strategy that prioritizes companies with robust governance structures and strong market potential. “In a nascent industry like cannabis, governance and strategic foresight are paramount.

We focus on companies that are not only well-managed but also poised for growth.

"We specifically look at leaders like Curaleaf CURLF, which is renowned for its expansive operational footprint and strategic partnerships that position it uniquely in both U.S. and international markets. Green Thumb Industries GTBIF stands out due to its robust wholesale strategies and high-margin product offerings, making it a strong player in the U.S. cannabis market,” Seymour noted.

“Meanwhile, Trulieve TCNNF leverages its strong presence in Florida to optimize production efficiencies and market penetration, setting industry benchmarks for profitability. These companies exemplify the type of growth and governance we seek in our investment choices. These are the types of companies that attract institutional investments first,” Seymour said. 

The Importance Of Gross Margins

Seymour explained how operational efficiencies contribute to improving gross margins across the cannabis sector.

"Companies like Green Thumb have honed their focus on high-margin product lines and strategic wholesale operations. For instance, Green Thumb’s first-quarter sales demonstrated a robust gross margin," he noted.

"By optimizing production processes and reducing overhead costs, companies can substantially increase their gross margins. This has been evident in cases where operational refinements have led to reduced production costs, directly enhancing profitability," he added. This strategy mirrors an industry-wide move towards price stabilization and operational optimization to boost EBITDA margins, essential for sustaining profitability amid market volatility.

Strategic Partnerships And Market Movements

Seymour highlighted the impact of strategic partnerships in the space, such as British Tobacco’s BTI investment in the Canadian cannabis company Organigram OGI.

“The involvement of British Tobacco it’s a strategic catalyst that opens doors to international markets and more sophisticated product developments.” Seymour also discussed the promising developments in the U.S. hemp cannabinoid market, highlighting Organigram’s strategic investments in this area.

Emerging Opportunities In Hemp And THC Products

“The U.S. hemp cannabinoid market is legally complex yet burgeoning, with potential sales estimated around $25 billion. Organigram’s move into this market through strategic investments positions them well to capitalize on this growth,” he said.

"The move into the hemp market is not just about diversifying products but aligning with the CPG sector's standards and practices, which are well-established and consumer-oriented." 

This strategic alignment with CPG practices helps build a sustainable business model that can thrive in a competitive market.

This approach, according to Seymour, positions companies to better manage risks, enhancing investor confidence.

Discussing the future, Seymour sees a dynamic market where state-level changes drive industry growth more significantly than federal reforms, with states like Ohio, Florida and Pennsylvania playing pivotal roles.

Learn more about leading cannabis companies and stocks, at the Benzinga Cannabis Market Spotlight in New Jersey on June 17th! Grow your business, raise money, and capitalize on the booming NJ recreational market. Don’t miss this must-attend event in New Brunswick. Secure your tickets now. Very few spots are left. Use the code "JAVIER20" for 20% off!

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