Why Does CNBC's Tim Seymour Think It's Wise To Invest In Cannabis?

With a spike in share prices within the cannabis sector in the week following the Republicans' release of their marijuana legalization proposal in November, it's hard not to think of federal regulation as an important catalyst.

However, during the week following Rep. Nancy Mace (R-SC) officially laying out her cannabis legalization plan, pot stocks took a massive beating.

Tim Seymour, director and founder of The Amplify Seymour Cannabis ETF CNBS CNBS, said that investors should not be investing in cannabis "necessarily based upon an expectation of some federal catalyst." Seymour was a guest on Benzinga's PreMarket Prep live trading talk show on Friday.

Nevertheless, in anticipation of that "massive moment" for the sector, investors should be confident, Seymour said, adding that "there's a ton of capital that wants to come in here. We're going to see a handful of more states this year.. a couple of very red states also coming online.

"The good news is that some of the biggest companies and some of the MSOs, and even some of the single state operators are really starting to define and separate on brand," Seymour told Benzinga's PreMarket Prep team. He added that pot stocks were going to see some insulation from pricing and margin pressure happening within the cannabis space.

"The quality matters," he highlighted, singling out Green Thumb Industries Inc. GTBIF and TerrAscend Corp. TER TRSSF as companies that are "separating themselves." After all, businesses that produce high-quality products are being rewarded.

Seymour commented on Weedmaps, a technology and software provider to the cannabis industry that recently signed a definitive agreement with a publicly traded special purpose acquisition company (SPAC), Silver Spike Acquisition Corp II SPKB, calling it by far the largest marketplace and high margin business in the industry.

"Investing in best-of-breed companies with pristine balance sheets again, relative to cannabis, I think is a safe place to be," he added.

Listen to the interview:

Photo: Courtesy of Roberto Valdivia on Unsplash