Jeffrey Vinik recently spoke to CNBC on January 10. In his interview, he scratched the ongoing pot stock craze. Vinik labeled the cannabis investments as excited and believes there is no much opportunity left in cannabis stocks. He also stated that the margin might not be that great in such investment. As per his belief, due to the ongoing craze to enter the cannabis investment space, a situation will soon arise where the demand in the market is overserved, thereby reducing the profits to a great extent.
Vinik is a well-known hedge fund manager who launched the Vinik Asset Management in the 1990s. Before this, he was associated with Fidelity’s Magellan Fund, during which he became a famous personality. He is known for his stock picking skills based on fundamental analysis. As per The Wall Street Journal, his fund has given a return of around 17 percent per annum from 1996 to 2013. Apart from fund management, he also has an interest in sports and owns the Tampa Bay Lightning and holds minority stakes in the Boston Red Sox and Liverpool Football Club
Speaking to CNBC’s Squawk Box, on the cannabis, he stated “I won’t say zero, but I guess 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.”
His estimation on the cannabis industry is in severe dissimilarity then that as put forward by Vivien Azer and Michael Lavery of Cowen and Piper Jaffray, respectively.
Both these analysts have chosen Canopy Growth and Tilray as the market leaders to direct the space in 2019 and lead the projected market surge. They also believe that the market will attain the valuation of about hundreds of billions of dollars in the upcoming decade.
However, as per Vinik’s opinion, such a positive prediction itself a matter of concern as it will lead to an unexpected rush into the market due to the existence of low barriers at the entry level. He further states that over time as the investors count increases in the space and the demand becomes still, it is then the Cannabis will become a low-volume and less profitable affair.
However, his estimation for the wider economic outlook is not on the same lines, and he believes that in spite of the current downtrend in the market, the stocks could soon touch their all-time highs amidst sound economic growth and low inflation. He specifically has a positive tint towards the tech stocks and mentions that the tech sector is in the mid-stage of a bull market which will take the stocks higher in the long run regardless of short-term corrections
He quoted that “I believe 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.”