Tim Seymour Talks Emerging Markets, Cannabis Stocks On PreMarket Prep

Tim Seymour, co-host of CNBC’s "Fast Money" and CIO of Seymour Asset Management, on Thursday joined the PreMarket Prep trading show. Seymour discussed a range of topics, including the state of emerging markets, similarities between the cannabis market and the dot-com bubble and which cannabis stocks are still reasonably valued.

Volatility Ahead

Following the Federal Reserve's rate hike Wednesday, Seymour said the U.S. economy is still firing on all cylinders, but there are signs the trade of buying U.S. equities and selling the rest of the world has run its course.

“I think you’re going to see some outperformance of rest-of-world versus U.S. between now and year end, and it’s not going to be a straight line, it’s not going to be without volatility. I still think October has plenty of minefields in it, and then we have November elections, which may or may not be a catalyst to the downside for markets,” Seymour said.

Mean Reversion

Emerging markets have been ice cold in 2018, particularly in China where concerns over the trade war have spooked investors. Seymour said it’s likely some of the cash invested in U.S. stocks will flow back into emerging markets at some point. Emerging market stocks have underperformed the S&P 500 by a staggering 22 percent in the past six months.

“You don’t have a growth scare, at least not yet,” Seymour said. “The fundamentals are actually, I think, significantly better than people think... I don’t think this is as simple as saying the worst is over, but I think on a reversion-to-mean-basis, this is almost unprecedented in terms of an environment where the world is not falling apart.”

Seymour said the last time EM stocks were trading at this low of a valuation was in early 2016 when oil prices were at $35/bbl. Today, the macro environment, particularly when it comes to commodity prices, is much more solid.

Related Link: Everything You Need To Know From The Cannabis Capital Conference

Cannabis Bubble?

Seymour said there’s a lot of excitement in the emerging global cannabis industry, and it’s easy to see how that excitement has developed into a mania in U.S.-listed cannabis stocks ahead of Canadian legalization next month.

“It’s a fascinating place to be investing. It’s a place that I think is not a fad,” Seymour said.

He said much like the dot-com bubble, there will be plenty of losers in the current cannabis boom. However, there will also be winners like Microsoft Corporation MSFT, which became overpriced in the near-term but ultimately remained a successful and profitable long-term investment.

“Are valuations at a place that people could say this makes no sense to me? Sure, no question... But there’s an obvious argument why an investor looks at a global cannabis producer right now and takes their valuation multiple looking out to 2021, 2022 or 2023 if you really want to get aggressive because you have to at least begin to factor in growth. That’s the whole story here,” he said.

Stock Pick

When asked for specific ideas of pot stocks that aren’t ridiculously overpriced, Seymour said Canopy Growth Corp CGC is a solid long-term bet for investors willing to stomach its near-term valuation.

“Canopy is still a very solid investment here based upon the strategic partner, the cash on the balance sheet, the first-mover production advantage, and that these guys are continuing to roll up different parts of their platform. I think it’s a well-run company,” he said.

Listen to Tim's full interview in the clip below.

PreMarket Prep is a daily trading show hosted by prop trader Dennis Dick and former floor trader Joel Elconin. You can watch PreMarket Prep live every day from 8-9 a.m. ET here. The replay can be found on Benzinga's YouTube channel, and the podcast is on iTunes, Google Play, Soundcloud, Stitcher and Tunein.