Bet against the weedstocks consensus
Who else feels like they are betting against the consensus while investing in weedstocks. Personally I’ve thought the consensus is that these companies will make a lot of money. If you watch any business news though, you will see many analysts saying not to invest in this sector. YOU WILL LOSE ALL YOUR MONEY.
In this short video with the founder of Bridgewater, one of the highest performing investment funds he describes the bet, he compares it to betting on the horse which no one thinks will win. If you are right you win huge.
Which consensus are you betting against
Within the Sector
Ray basically says you have to bet on the darkhorse, the consensus is already priced into the market. You have to bet on the little guy coming up and becoming the new “unicorn weedstock”
This would be the consensus within the weedstock sector I believe. Everyone knows Canopy Growth is the leader but can a company come from behind and catch up. Could the hostile take over of CMED by Aurora ACB.T be the final move for the darkhorse coming from behind, time will tell. Or is there an even smaller company out there today that will execute it’s plans so effectively that it will one day be the biggest weedstock in the world.
At this time, I’m investing in most of the top companies in the sector. There is a reason the consensus believes WEED.T is the leader of the pack. Canopy Growth has executed on every level, they are expanding international etc. That being said I’m holding some of the smaller guys just in case they do come from behind. Companies like LG.V (LGC Capital) or Cronos Group as I believe they could grow into the size of Canopy eventually.
I don’t know enough to bet against the consensus within weedstocks, I wouldn’t take my money out of the leaders and put it into a small cap company. I can make money riding the wave of what other investors believe will be the top performers, might not be huge profit but is also less risky.
Outside the weedstock sector
Looking at it from a higher level.
Currently the consensus by most institutional investors is to stay away from weedstocks. So just by investing in this sector you could be betting against the consensus. Institutional investors are managing a lot of money and need to protect that money. If you lose money it takes a lot more to gain that money back.
YOU ARE GOING TO LOSE ALL YOUR MONEY! Classic BNN video clip from just a few day ago of money manager saying you will lose all your money in this sector. He under values the estimated market by about 10x if you count ancillary companies, and about 3x if you only count producers. (Thinks market is worth 2 billion)
The consensus of big money is to stay out of this market until rules and regulations have been laid out. Huge companies want to know what they are working with, what kind of profit margins, how high are the taxes etc. The are limiting their risk by coming in at a later date. Investment funds are willing to come in late to the party as they know there will be gains made over the next 20 years anyways, it takes a lot of the risk out. Waiting for the market to mature basically.
The key to what Ray says, you have to be RIGHT. I think back to the movie “the big short” that would probably be a prime example of betting against the consensus. Betting that a market that everyone sees is booming and believes it will continue to boom, will crash. Does this mean you have to bet against weedstocks, I don’t think so as the mainstream hasn’t bought in and started to believe in this sector yet. The mainstream is still in consensus that these companies won’t make that much money or many of them will crash and burn with a few left over survivors.
So far my bet against the institutional investors consensus to stay out of weedstocks has worked out well for me. I don’t know if it will continue this way or if there will actually be a crash which causes me to lose all my money. If it happens I’ll tell Berry he was right all along and let him start managing my money. Some of my bets on smaller weedstock plays have worked out as well instead of putting it all in Canopy.