Managers Explain Their Cannabis ETFs: CNBS, With Tim Seymour
In this four-part series, Benzinga takes an exclusive look at some of the highest valued, US-traded cannabis ETFs.
For our fourth and last installment, we spoke with Tim Seymour, director and founder of The Amplify Seymour Cannabis ETF (NYSE:CNBS).
The Amplify Seymour Cannabis ETF (NYSE:CNBS) launched on the New York Stock Exchange in July 2019. It’s an actively-managed ETF led by Seymour, who is CIO of Seymour Asset Management firm, and Senior Advisor to the JWAM Growth (Cannabis) Fund.
“In my ETF we have a clear set of guardrails requirements we have to follow for investability,” says Seymour. “We are a cannabis specific ETF and we are named as such and labeled as such. So we have to have a particular concentration of cannabis names in the portfolio. And those names have to have a particular concentration of their revenues be cannabis.”
Per the ETF’s rules, at least 80% of the names in the portfolio must be cannabis-dedicated companies. Companies must also have at least 50% of their revenue coming from cannabis. That leaves out tobacco, beverage and pharma companies that may have high stakes in the sector, but are not cannabis-specific.
“The other guideline is that we're a US-listed and regulated ETF, which means that we have to comply to Standard 40 act criteria," Seymour says.
This legislation prohibits investment vehicles to invest in companies that partake in activities that are potentially illegal on a federal level. That's why Amplify doesn’t invest in cannabis MSOs directly or any other US-dedicated plant-touching THC businesses, even though their risk might be very low for investors. "We have found other ways to get exposure to some of these businesses," he said. “The issue ultimately is that we need to find companies to invest in that are presently legal. So that means they could be Canadian companies, they could be Australian, or companies that are not THC, but are CBD-related, or companies that are involved in the ancillary."
When it comes to strategy, Amplify is an actively-managed ETF. That means that it’s not tied to an index.
“We are free to trade day in and day out, every day," he said. "That doesn't mean we do it. But if there are catalysts to investing in companies or divesting in companies for that matter, we're able to act on those quite quickly."
It’s crucial to have the ability to evolve with the sector and act with speed if a company starts to show some concerning signals, he explained.
“Cannabis is the exact place where ETF investing really was meant to have an impact because of the thematic way investors view cannabis and consumption growth,” says Seymour. “Much in the way investors want to invest in other things like AI, or gaming, or you know, cloud or work at home. This is the perfect concept for investors, in my view, because the industry is changing. The top five or six investable public companies in cannabis from 2017 and 2018 are not in the top five or six today."
For Seymour, Investing in cannabis stocks now is really about bottom up investing and “understanding those operators who have good assets, who are great operators and who have proper balance sheets to get through a difficult period in capital markets.”
Lead image by Ilona Szentivanyi. Copyright: Benzinga.
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