Joint Ventures: How small-time investors handle the highs and lows of cannabis stocks

As legalization nears, more and more small time investors are looking to cash in on potentially lucrative cannabis stocks.

There's a 'pent-up, heightened demand' for cannabis stocks,' investment CEO says

Small time investors Brandon Colwell and Greg Everett, left, and Steve Hawkins president and CEO of Horizons Canada, right, are all knee deep in Canadian cannabis stocks. (Paul Borkwood/CBC)

In a rented room in a Burlington bungalow, Brandon Colwell and Greg Everett spend hours on their computers betting on weed stocks every day.

"I easily spend six to 12 hours a day in this sector," Colwell, a student and a part-time server at a restaurant in Burlington, told CBC Toronto.

Joint Ventures: How investors are trying to cash in on cannabis

6 years ago
Duration 3:24
The final part of CBC Toronto's Joint Ventures series explores how Canadian investors are trying to cash in on cannabis stocks.

Everett has a full-time job at a restaurant as well. Despite warnings of the high risks and questions of a green bubble, the friends are just two of many small-time investors diving into cannabis stocks as legalization nears, reaping huge returns but also sweating through harrowing market corrections that wipe out their gains.

Colwell bought his first stock in 2014 when he saw that Tweed, now called Canopy Growth Corporation, joined the Toronto Stock Exchange.

"I was thinking, 'Wait, you can buy cannabis as a stock?' I'd never heard that before ever," he recalled. 

So he first invested $905 in Canopy Shares. Colwell says he sold those shares for $7,500 in November.

"From there, it was game on. I started looking at all the other companies that were out there," he said.

Now, when stock prices peak, he says he sits on a $60,000 return on his initial investment. But Colwell says cannabis investing isn't for the faint of heart.

"You can't talk about this without talking about the chaotic and sometimes terrifying ride that you go on as well," he said.

"It's kind of like going on a roller-coaster for the first time. You're petrified when you look at all this money you've made on paper. Of course, you haven't sold it so it's not real yet but then all of a sudden you see a crash or a correction."

Brandon Colwell monitors the cannabis sector on this 52-inch monitor in a small rented room in Burlington. (Paul Borkwood/CBC)

He remembers his first crash was a gut-wrenching time.

"I didn't know how to cope with this, I was by myself. I had no one else trading."

He quickly connected with Follow The Money, a community of 2,200 small-time investors across North America, to share advice and ideas.

"I don't go a day without using that group as a way of constantly being on top of the cannabis industry," he said.

Colwell's passion for playing the market is almost tangible, and his co-worker and friend Greg Everett caught the bug.

"You can hear how passionate he is," Everett said. "I didn't want to miss out, but I took everything with a grain of salt too. I did my own research and due diligence."

Steve Hawkins is the president and CEO of Horizons ETF. (Paul Borkwood/CBC)

But when it came to actual trading, he was clueless.

"I didn't know how to place an order, I didn't know how to trade. So [Colwell] kind of walked me through everything and now we just kind of sit in this room and trade and bounce ideas off each other," he said.

It's a partnership that has paid off for Everett, despite a rocky start when he first invested $30,000.

"A correction happened soon after and I lost $20,000 right away," he said. "I was in the red probably for a good six months. Speaking of roller-coaster, it was literally like my heart was in my stomach the whole time."

"Luckily, I did have someone to talk to about, like, 'What do I do,' because all I wanted to do was get out," Everett recalled.

But Colwell advised him to sit tight, and eventually the prices picked up. Right now his shares are valued at $161,000, he said

Now both men, having experienced the highs and lows of the business, are looking to dig in.

"I want to do this for the rest of my life," Colwell said.

The two are constantly plugged into the movements in the cannabis industry, saying their windfalls are only possible because of intense research into weed producers. 

"They're growing exponentially. There's so much potential. There's so much hype behind it," he said. "You have to start looking for which companies are going to be the good companies."

That's something that Steve Hawkins is well-versed in. He is the president and CEO of Horizons ETF, creators of the world's first cannabis ETF.

'Pent-up, heightened demand'

An ETF — or Exchange-Traded Fund — is a collection of stocks, so the investor is exposed to several different companies. It is often considered less risky than investing in one company's stocks.

The Toronto-based company first launched its bouquet of weed stocks — Horizons Marijuana Life Sciences Index ETF, or HMMJ — last April after a spike in investor interest.

"We had such a pent-up, heightened demand of investors who wanted to get into this sector," Hawkins said. 

When HMMJ first launched last April, there were about 15 cannabis companies in their fund, which were valued at $7.2 billion.

Now just 10 months later, there are about 60 companies, valued at $25 billion.

"This is taking someone's social preferences and putting it into a thematic sector and letting them invest in it because its something they believe in," Hawkins said.

As cannabis legalization looms in Canada, CBC Toronto takes a look at how businesses are affected by the green rush. Who will rise from the ashes and who will be left behind? (CBC)

With files from Chris Glover