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The US cannabis industry is growing rapidly, with the market expected to reach around $45 billion in revenue this year.
Cannabis stocks have also seen investor interest as Trump sounds open to potentially declassifying marijuana from a Schedule 1 drug to a Schedule 3 drug.
Well joining me to weigh in today is Henry Miller, managing director for Polaris Capital Group.
Henry, welcome.
Great to have you on.
Thank you.
Thanks for having me.
So for viewers out there who are wondering what's happening in the sector, give us a better understanding of cannabis.
Sure, so that's a really broad question, and I think it's important to note that what's happening in the cannabis sector is going to vary state to state because it really is a state legalization process until and if the federal government ever makes a decision around legalization, so.
As states legalize either medically or recreationally, we typically see that there's a frenzy of activity, capital raising investment into the space while there's a rush for entrances to grab market share in their state or for operators that are known as MSOs that operate in multiple states to enter a new market.
There's typically a period of heavy growth, market competition, and then a level of compression.
That is followed by kind of a steady growth trajectory.
So some of the earlier states to legalize such as California, are in kind of that steady growth trajectory phase following compression.
Some of the newer East Coast states are kind of in that earlier frenzy to grab market share.
Yeah, and we're here on Wall Street, and what happens in the nation's capital affects not just Wall Street but also Main Street as well.
So when it comes to investing in this space, give us an idea of what you think needs to happen.
I think that the biggest thing that could happen is that we get some sort of regulatory change around rescheduling, and the hope there would be that that allows for additional capital to flow into the space because we've moved from a Schedule 1 to a Schedule 3 substance.
It would make banking significantly easier.
It would change the taxation around cannabis.
And I think to your point about Main Street and Wall Street, a lot of the investment to date in cannabis has typically been Main Street retail investment.
I think this would attract a lot more Wall Street type institutional money and space.
Yeah, so when it comes to actually investing in the sector, what would you say to viewers out there who are in retail?
I think that the biggest thing to look at is what are the fundamentals of the underlying cannabis business that you're looking to invest in and to remember that it's not different from underwriting any other business or industry.
I think if you get caught up in the story of cannabis as this up into the right growth story forever, you can sometimes. get tripped up and it's important to run the companies well every single day just like any other industry, and you have to find ways to pick the right winners just like anywhere else in the market.
So for viewers who are wondering, is this time different when it comes to investing, what would you say to them?
I would say that it's not different from the trajectory that other emerging industries have followed.
So if we go back, you saw a boom in telecom that then busted and then stapled out.
We saw dot coms boom and bust and the internet didn't go away.
We saw real estate in '08 boom and bust and it didn't go away.
I think in cannabis we've seen a lot of that initial compression of the emerging industry, and we're now in that sort of post bust window where there's significant opportunity because you have discounted valuations.
It's potentially the best buying opportunity ever in the industry despite some of the initial challenges that it's faced.
And Henry, you're joining me as we're about to head into the final months of 2025, and it's also the time of year when we start looking ahead to the new year.
So what are you paying attention to at Poloris and tell us about the outlook.
Uh, well, high level, I think at the end of the year we typically see a little bit of a bump in cannabis around the holidays.
You know, consumers are typically looking to purchase on the holidays, so that's always a little bit of a bump for the industry on the revenue side.
And as we look to year end, we're really excited going into 2026 about the opportunities for the new fund.
We think that the opportunity to capture a wave of consolidation in the industry presents a really, really A high upside opportunity to build the largest kind of scale businesses that will come out of cannabis.
So think your constellation brands maybe in the beverage space.
We believe the opportunity to build that in cannabis is in front of us today.
OK, Henry, well thank you so much for joining me today at the New York Stock Exchange, and thank you so much for sharing your perspective.
Thank you very much.
Happy to be here.
Thank you.
