Why Canopy Growth's earnings are disappointing pot investors

CEO Bruce Linton tells CNN's Julia Chatterley why Canopy Growth earnings sent shares lower, and his advice on how to invest in pot stocks.

Posted: Nov. 15, 2018 12:48 PM
Updated: Nov. 15, 2018 1:05 PM

Canopy Growth (CGC) CEO Bruce Linton wants investors to take the long view on pot.

Shares of the Canadian cannabis company slumped Wednesday following an underwhelming earnings report. But Linton said things will get better.

"Anybody who's got the nerves for it should invest in cannabis stocks and think in 6-month chunks," Linton told CNN anchor and correspondent Julia Chatterley on "Markets Now" on Wednesday.

The first six months are about educating sales people and customers, he said. The following six are about building factories for products like edibles and bottling lines for beverages.

Canopy plans to start selling a range of new products in Canada in the second half of 2019.

It's been a volatile period for cannabis companies. When recreational marijuana was legalized in Canada last month, pot stocks swung wildly.

In the United States, former attorney general Jeff Sessions was a fierce opponent of making marijuana legal.

But Linton doesn't believe his ouster will necessarily lead to federal cannabis legalization in the United States.

"I don't think it ever comes down to one person," he said. "There was a prior government before the Republican government, and they didn't actually regulate or make it organized."

Instead, he thinks something else will move the needle on marijuana legalization.

"I think it's going to change, and I think it's going to change quickly," he said, as people become more interested in the medicinal benefits of marijuana. "What we're talking about is regulating and educating, not ignoring."

Focus on small-caps

Alger fund manager Amy Zhang also joined Chatterley on Wednesday's show. She explained why she favors small-cap companies.

"Small-caps still have a lot of tailwinds with the trade war, tax cuts and also rising interest rates," Zhang said. Unlike big international companies, smaller businesses generally don't have overseas operations that would get hit by tariffs. But they still benefit from tax cuts. And because they carry less debt than larger companies, rising interest rates don't hurt them as much.

Zhang said that her fund is stacked with innovative tech and healthcare companies like Veeva (VEEV), a cloud-based healthcare software company, and CareDx (CDNA), a non-invasive transplant diagnostic company.

"Markets Now" streams live from the New York Stock Exchange every Wednesday at 12:45 p.m. ET. Hosted by CNN's business correspondents, the 15-minute program features incisive commentary from experts.

You can watch "Markets Now" at CNN.com/MarketsNow from your desk or on your phone or tablet. If you can't catch the show live, check out highlights online and through the Markets Now newsletter, delivered to your inbox every afternoon.

Next week, "Markets Now" will stream on Tuesday instead of Wednesday.

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