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Richard Croft, chief investment officer at the Toronto-based Croft Financial Group, remembers looking at the cannabis space in 2017 before the large runup and not being convinced by the sector. That stance made him miss out on the green wave, he admits, but with stocks selling off, he’s not being tempted to look for an entry point. Instead, he’d prefer taking a covered call strategy.

The only one I'd look at is Canopy and I don't think I'd be jumping into that one either Richard Croft, chief investment officer, Croft Financial Group

“The only one I’d look at is Canopy and I don’t think I’d be jumping into that one either,” said Croft, who said he’d be looking for a bottom by determining whether the stocks have moved two standard deviations below their 50-day moving averages.

Zandberg expects that in January the markets will finally begin to turn around from the rollout of edibles, vapes and extract products.

It’s the failures in the recreational market that have led Purpose Investments portfolio manager Greg Taylor to significantly lower his exposure to Canadian cannabis LPs. Taylor holds a higher cash position — 20 per cent — than he does in Canadian cannabis stocks — about 15 per cent. The bulk of his portfolio is in U.S. cannabis stocks.

The rollout of recreational cannabis hasn’t been as successful as investors hoped, said Taylor, who pointed specifically to Ontario. There are only 24 retail stores in operation in the province, whereas Alberta, where the population is about one-third of Ontario, has more than 300. Licensed producers built up massive inventories they could not sell and have to readjust to a reality in which there’s a lack of retail space.

The only plays Taylor still sees upside in are the extractors who will benefit from the rollout of cannabis 2.0 products. For the others, he recommends taking a wait and see approach until “Ontario is fixed.”

“The space could be in the penalty box for a while in Canada and people who want exposure will be looking elsewhere,” Taylor said.