Marijuana is displayed through a magnifying glass inside a dispensary in Colorado, U.S. (Photographer: Matthew Staver/Bloomberg)

Top Fund Manager Will Look at Cannabis and Crypto - One Day

(Bloomberg) -- Top-performing fund manager Noah Blackstein is intrigued by cannabis and cryptocurrency companies but says he’ll wait until he can distinguish the winners from the losers before plunging into the emerging sectors.

“I’ve seen the difficulties with being too fast or too soon,” said Blackstein, whose C$1.6 billion ($1.2 billion) Dynamic Power Global Growth Class has outperformed 554 global peers over the past 10 years. His C$1.2 billion Dynamic Power American Growth Fund is in the 99th percentile among its U.S.-equity cousins in the past five years, according to data compiled by Bloomberg.

Blackstein said he has no doubt that legal marijuana and cryptocurrencies are here to stay, but likened both sectors to the early days of the Internet when it was impossible to know which companies would thrive and which would wither.

“It was Google versus Yahoo for a long time, it was Apple versus BlackBerry for a long time,” he said. “Once the leaders get established or you can see the business model being flushed out, it becomes much more interesting.”

Blackstein said he saw Amazon.com Inc. present at a conference in the late ’90s but didn’t buy it until 2008. He still holds it in both his funds.

“Did it matter if you paid $50 for Amazon or $150 for Amazon? No, not when it’s a $1,700 stock,” he said. “You don’t want to be late, obviously, but you also need to see real revenue and real earnings and who’s executing.”

Pot Windfall

Pot stocks in Canada have soared over the past year as investors bet on a windfall from the legalization of recreational marijuana in October. Canopy Growth Corp., the largest cannabis stock by market value, has soared fivefold in the past 12 months. That gives it a market value of more than C$8 billion, on estimated revenue of about C$79 million last fiscal year.

While he waits out the marijuana sector, Blackstein holds a concentrated number of stocks that generally fit in the technology industry. He said the Toronto-based fund manager, a unit of Bank of Nova Scotia, would consider branching out into cannabis, though it might take a few years.

“I’ve owned gaming stocks in the past, I’ve owned alcohol stocks in the past, so I don’t have an issue with owning a cannabis stock in the future, but what it has to be at the end of the day is a rapidly growing company with the opportunity to be significantly larger,” he said. “I don’t know if any of these current cannabis companies offer that or if it’s another generation of cannabis companies that are still to come.”

In the short term, Blackstein said he sees investment possibilities in new healthcare technologies, fintech, and the Indian e-commerce market.

“There’s more opportunities than you can shake a stick at,” he said.

His picks have served investors well, with the American Growth Fund up 33 percent this year to May 31, while the global fund has jumped 13 percent.

Here are his funds’ top five holdings as of April 30:

Dynamic Power American Growth Fund

Dynamic Power Global Growth Class

Abiomed Inc.Baozun Inc.
Palo Alto Networks Inc.Samsung Biologics Co.
GrubHub Inc.Weibo Corp.
ServiceNow Inc.ServiceNow Inc.
Paycom Software Inc.Vertex Pharmaceuticals Inc. 

©2018 Bloomberg L.P.

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