‘Nobody’s Going to Make Money’ on Pot Stocks: Hedge Funder Jeff Vinik

January 10, 2019 19:01 UTC

Renowned hedge fund manager Jeffrey Vinik has dismissed the pot stock craze, describing cannabis investment as overrated and likely to suffer from squeezed margins. Speaking on CNBC’s Squawk Box on January 10, Vinik also revealed that bitcoin currently accounts for “zero percent” of his investment portfolio.

Returning to the hedge fund scene after a five-year hiatus, the Tampa Bay Lightning owner, who also holds minority stakes in the Boston Red Sox and Liverpool Football Club, believes that an entry rush into cannabis investments will create a situation where market demand is overserved, and margins become too small to be profitable.

In his words:

I won’t say zero, but my guess is that they’re overhyped. There’s going to be too much competition, margins are going to come down, [and] nobody’s going to make money.

Rosy Cannabis Stock Predictions Versus Vinik’s Bearish Outlook

Tilray, the poster child of the pot stock bubble, has a price chart that looks more like it belongs to a cryptocurrency than a publicly-traded company.

If anyone has worthwhile experience in predicting stock performance, it would be Vinik whose hedge fund Vinik Asset Management returned an average of 17 percent per annum from 1996 to 2013. His prediction, however, is in stark contrast to the cannabis industry outlook put forward by Vivien Azer and Michael Lavery of Cowen and Piper Jaffray, respectively.

Both analysts have picked Canopy Growth and Tilray to lead the space in 2019 amidst a projected market surge that will see the sector achieve a valuation in the hundreds of billions of dollars over the coming decade.

Vinik, on the other hand, believes that such optimism is itself a cause for concern as it will lead to an unprecedented entry rush due to pot’s relatively low barrier to entry. Over time, as more and more investors come into the space and demand remains more or less stagnant, Vinik predicts that cannabis will thus become a stagnant-volume, low-margin space.

Vinik’s wider economic outlook is not quite so pessimistic, however. Speaking on Squawk Box, he revealed that believes that despite ongoing turbulence, stocks could embark on a multi-year uptrend across amidst good economic growth and low inflation.  In his opinion, tech stocks specifically are in the mid stages of a bull market, which means that regardless of short-term retracements, the asset values will remain bullish in the long term.

In his words:

My belief is that we’re in a secular bull market. In retrospect — I didn’t know it at the time — it started in 2009 and if I had to guess, we’re halfway through it, driven by good economic growth and low inflation.

Featured Image from Joe Rogan Experience/YouTube

Last modified: January 10, 2019 16:17 UTC

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@DavidHundeyin

I am a busy Nigerian writer, journalist and writer with an interest in tech and finance. When I'm not contributing to CCN and traveling around Africa, you can catch me contributing to CNN Africa, or in the writers room at 'The Other News', Nigeria's weekly answer to 'The Daily Show' with nearly 2 million viewers. My work on 'The Other News' was featured in the New Yorker Magazine, and that was then cited in the Washington Post so I'm not sure that counts as a feature but I'll definitely mention it too! I have been nominated by the US State Department to take part in the 2019 Edward R. Murrow Program for journalists under the International Visitors Leadership Program. I also like hamsters. You can reach me on Twitter at _David_Hundeyin