Poseidon Asset Management Managing Director Emily Paxhia oversees three cannabis-dedicated investment funds. Since 2013, Paxhia and her brother Morgan have provided funds to leading brands, including Aphria (2014), Headset (2018) and the Ceres Acquisition Corp. CERAF brand Parallel (2021).
Paxhia recently spoke with Benzinga about several possible investment considerations that may pique the interest of investors, including those with limited funds at their disposal.
Paxhia believes investors have a variety of options to consider, with the majority of the market currently undervalued.
Many Cannabis Stocks To Consider: "The Entire Market Is Lower Priced Than It Should Be"
Paxhia highlighted all but the top four or five market leaders as undervalued cannabis options. She considers the current climate an opportunity to invest further into some of the industry's leading options.
Paxhia shared her selection process, saying that Poseidon prefers to look beyond the top players that receive the bulk of the attention and investor funds.
She sees immense value in companies not receiving as much of the funding flow.
"We still think there are viable companies that will be interesting to execute over the next few years," Paxhia said. "But because they're not in that top tier, the light of capital doesn't shine on them the same way."
Paxhia and her brother often discuss the fact that the sector is not created equally and that market strategies underscore this point.
"Each MSO is really starting to emerge as having their own strategy that they're focusing on," she noted.
Paxhia highlighted one investment, Ascend Wellness Holdings, Inc. AAWH, and its "go deep, not wide" strategy. "They focused in-depth on certain core markets," Paxhia said, noting Ascend's presence in Michigan, Illinois, Ohio, New York, New Jersey and Massachusetts.
She said Ascend's strategy varies from top players like Curaleaf Hldgs Inc. CURLF, which is "absolutely going wide." That said, MSOs on the smaller level, like Columbia Care Inc. CCHWF, have utilized the go-wide strategy.
In addition to a strategy, Paxhia stressed that a company needs to demonstrate its ability to execute and remain focused in order to qualify as a viable investment option.
Overall, before making any decisions, Paxhia recommends that investors read company filings and align with preferred operators based on their strategies.
Looking Beyond MSO Investments? Consider Cannabis Cultivation
Investors may find value in ancillary cultivation-focused companies, according to Paxhia, and should take additional steps when assessing the market's future.
She cautions that investors "really have to think carefully about how you evaluate what comes next in those areas," while recognizing cultivation trends and margin protections as just two critical areas of consideration.
Poseidon currently has a minimal presence in the market, with an investment in GrowGeneration Corp. GRWG. She said other options possibly worth consideration include Hydrofarm Holdings Group, Inc. HYFM and Greenlane Holdings, Inc. GNLN.
She credited GrowGen and Hydro Farm specifically for their "skate where the puck is going" strategy.
Expect Market Volatility
Without giving trading advice, Paxhia believes now is a good time to consider investing in the cannabis space though be prepared for market volatility.
"Volatility is definitely expected in this market, especially in lower price names," Paxhia said pointing out how a stock can significantly sway from a minimal shift in volume.
© 2023 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.
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