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Tony: Cannabis is hot these days. Attracting seasoned veterans and novice investors alike to the space. Well, cannabis investing can be exciting due to the potential for great returns. It is still currently a very volatile industry that hasn't really found its footing yet. Enter Amplify ETFs and its newly launched Amplify Seymour Cannabis ETF. We have CEO Christian Magoon with us to talk about the state of the industry and now his product is helping cannabis investors navigate sometimes shopping market. Hi Christian, thanks for joining us.

Christian: Hey, thanks for having me, Tony. Good to be here.

Tony: And if you could just tell us about your ETF and when it launched.

Christian: Yeah, so earlier this week on Tuesday we were on the New York Stock Exchange. We launched the Amplify Seymour Cannabis ETF, ticker CNBS for cannabis. And what's unique about it is it's an actively managed ETF from experienced investor. Tim Seymour, you know, Tim is most known for his time on fast money over the last 10 years. He's got the nickname of king cannabis because he really started covering cannabis stocks several years ago. He's an early stage cannabis investor, both in public and private markets. And we think he's the most highly experienced professional to manage an ETF that can adjust its portfolio on a daily basis. So Tim manages the portfolio. The portfolio ranges from about 25 to 50 stocks depending on market conditions. A couple of unique things about the portfolio is it's purity. 80% or more of the portfolio must have 50% or more of its revenue from cannabis or hemp activities.

Christian: In addition, there's a legal screening component. So the fund cannot own any companies that are violating state or federal law. As you know, there's some publicly traded companies out there that do have those risks. We're trying to avoid them per our prospectus mandate. Ultimately we think, this is about a risk adjusted return strategy. Uh, you need to be able to take advantage of the opportunities on a daily basis. Also manage risks on a daily basis. This is a fast moving area. We think, having a portfolio manager like Tim Seymour with his expertise and experience in the industry, uh, is going to be a great addition to the cannabis ETF ecosystem.

Tony: Correct me if I'm wrong. Did you say you update the list of companies on the ETF daily?

Christian: That's right. So you can go to the website, and look at the CNBS homepage and every night in the evening, all the holdings are updated. So you can see if Tim's made a trade, during that day, the portfolio is, a great portfolio to maybe even look at different ideas. There's some unique stocks in the portfolio that maybe not everyone thinks about. Canaccord for example, is the largest investment bank in the cannabis space. They're a financial play and they're in the portfolio, which is, representative of, of kind of their leadership in the capital market area. We think there's going to be continued mergers and acquisitions and then also depending on federal regulations, we expect there'll be ultimately a lot of IPOs in this market in the next few years.

Tony: Well, and, that leads me to my next question. Could you tell me about some of the other securities that you have in the ETF and also were there any that you stay away from? And if so, why?

Christian: Yeah, great question. So, when you take a look at our top holdings, you'll see canopy growth. You'll see, Aurora cannabis. You'll see, many of the names that are kinda headlining the industry. There's several names that are unique in the portfolio that, maybe you'll discover like Canaccord or a Canopy Rivers. That's our top, a top 10 holding that maybe doesn't float very high into the security selection of other cannabis ETFs. You'll see all these businesses have the majority of their revenue from cannabis and hemp activities. Uh, right now we estimate about 91% of the portfolio's weight fits in that area. What you won't find in the portfolio is tobacco stocks. And, we've seen other cannabis CTS take sizeable weightings in tobacco stocks up to 20, 25% of their portfolio.

Christian: We don't believe that's a direct play today. It could be in the future, but we don't think that's as linked to cannabis. as we'd like, in addition, we're avoiding, exposure to multi-state operators, so-called MSOs. You know, these are companies that are operating illegally against federal law. They can't be listed in the US by the Nasdaq or the New York Stock Exchange. They're in the OTC market and Canada. And, uh, there are some funds that are using derivatives to access the MSOs, but, we believe there's just too much risk there - both on the counterparty side and also the potential law enforcement or antitrust type, FTC investigation into their operations. So we're staying away from those, MSOs at this point. But again, we're an active ETF, so as things change and we're seeing, you know, FDA regulations change, we're seeing congressional hearings on the states act as it pertains to banking, cannabis companies.

Christian: All these things are happening on a daily basis. We're able to change our portfolio on a daily basis. The majority of the cannabis ETFs out there today are index-based, which means they only can change their portfolio when the index reconstitutes that's either once a month in some cases or only four times a year. So we think, you know, investing in the cannabis space, you wouldn't read the newspaper once every month or, or four times a year and feel like you are informed. Why would you want to own an ETF that only can buy yourself stocks on a monthly or a quarterly basis?

Tony: You mentioned risk, and that's a big part of the canvas play these days. A lot of volatility. So why should investors trust your basket of stocks ? What sets you apart from other cannabis ETFs?

Christian: Well, I think first the legal kind of tests that we have, where we're excluding companies that are in our opinion and third party counsel opinion are violating federal or state law. That's very important. Keeps out some of those names that could have undue risks in the future. That legal review is important. I think second, the purity is important. Uh, you know, you don't want to have a bunch of companies in the cannabis space that don't have the majority of their revenue linked to cannabis or hemp, uh, activities. I think that's very important. You look at our portfolio today and you don't see a company like CannTrust. CannTrust has some legal issues right now going on in Canada about potentially violating some Canadian laws in terms of doing some of that illegal growing in their business. Their stock is off, you know, close to 40%, that is still in the majority of the cannabis ETF holdings that are out there currently.

Christian: It's not in our portfolio. Why we have risk controls and part of our risk control is to be able to actively manage the portfolio and not have exposure to names. So, would we have had CannTrust before this scandal broke? Yeah, it would have been in our portfolio because they have been a market leader. But would we have been able to react in day one or day two before the stock was down so much and remove them from the portfolio? We think the answer is yes because of the seriousness of allegations. So I think, you know, legal review, purity and the ability to act from a risk control standpoint to remove names or get out of names, should they start to stray into a waters that are problematic from a regulatory or risk perspective.

Tony: I'm glad you brought up CannTrust cause they're in the news a lot. They having trouble with the regulators up in Canada. And you having Tim Seymour as your portfolio managers, means I'm sure you're plugged into the market. What did you think of Canopy Growth and what happened to Bruce Linton and what can other cannabis companies kind of learn from that experience?

Christian: I think when you look at canopy growth, you know, they're a solid company and Bruce did a great job building them to a where they are. But it's clear that, um, that this industry now is, um, searching for, I guess, world-class talent that can build solid brands. You know, it's not necessarily in the future going to be about how much you can grow cannabis for. We think, and Tim thinks this is going to be a more of a consumer product story as either hemp or a traditional marijuana, makes its way into all types of categories - be it beauty, medical, recreational. And you know, consistently when you look at the winners in consumer products, it's companies that have built a really world class brands where people are attracted to them. There's some pricing power, and I think kind of the move with canopy is to really move on from somebody who built and originated kind of standard entrepreneur into somebody who's more of an operator with experience, building a major brand. So, I think Bruce will continue to be heavily involved in the industry, and looked upon as a visionary. But I think this is more about the life cycle of the cannabis industry and canopy growth in particular, not necessarily about any issues in the management side, that were ethical or, or involved in a type of problematic activity. I think it's just, again, the natural progression of the cannabis sector becoming more of a consumer product brand business going into the future.

Tony: And I'll get you out on this question. What kind of returns are you guys looking at for CNBS, I'm going back to your ETF. What kind of return do you guys targeting and what can investors expect to get from investing in your ETF?

Christian: Well, I think first I would say that the cannabis sector has been very volatile, right? So we've seen more downside than the market, at times, the S&P let's say, and then more upside than the market, when the s and p is actually had a nice run. There are other factors though that impact cannabis that are unique, whether it's FDA rules, it's congressional hearings on banking. So there's other factors that can from time to time, make cannabis a uniquely traded asset class relative to the overall equity market. But we think, you know, over the next say, three to five years that this area has incredible risk reward metrics. We think the growth of this industry is going to be massive. Most of the research shows that, projected sales and revenue from the cannabis business worldwide is expected to grow at a 30% compounded annual rates.

Christian: The trend of legalization is definitely on the side of cannabis companies. Currently 98.6% of Americans, live in a state that has some form of legalized cannabis use. We see that only continuing, certainly the presidential election. We've seen many of the Democratic candidates come out in favor of legalization. And we're waiting to see where president Trump, decides. You know, I live in the state of Colorado. Colorado's had legalized for many years and we've recently passed over a billion dollars in tax revenue from cannabis. So that tax revenue, I think is a big carrot for state and federal governments. So we see a bright future for the cannabis space. We think it's going to be a nice growth sleeve or a growth component to an investors overall allocation and we think it's going to be a bumpy ride. There will be additional volatility, but we think over time the risk adjusted returns, will be favorable, over the next three to five years. So we're bullish, excited to bring CNBS to market and Tim Seymour's expertise and a look forward to continuing to provide a ton of education and insight from Tim and you know, people can reach out to amplify ETFs and sign up for the regular portfolio manager commentary as well as some of the interviews and interactions Tim does directly with cannabis CEOs from many of the major companies.

Tony: Thanks for joining us, Christian.

Christian: Thanks a lot. Appreciate it.

Amplify ETF CEO Christian Magoon is excited about his company's newest product, the Amplify Seymour Cannabis ETF (CNBS) because he believes that his company's basket of cannabis plays will provide the stability cannabis investors currently lack.

Portfolio manager Tim Seymour updates the ETF daily, giving passive investors some security in a fluid cannabis investment environment. 

"Tim is most known for his time on fast money over the last 10 years. He's got the nickname of king cannabis because he really started covering cannabis stocks several years ago. He's an early stage cannabis investor, both in public and private markets. And we think he's the most highly experienced professional to manage an ETF that can adjust its portfolio on a daily basis," Magoon said. 

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The ETF ranges between 25 and 50 stocks depending on market conditions with at least 80% or more of the basket being comprised of companies who generate at least 50% of their revenue from cannabis and hemp activities.

Check out the video above for the full interview. 

Watch: How This Cannabis Software Company Became a First of Its Kind