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This week’s bounce in pot stocks — the first in at least two months — could be the start of a renewed bullish run, some portfolio managers believe, as investors react favourably to more regulatory clarity on retail stores in Ontario and better-than-expected earnings from some of the major licensed producers.

“The sector got very washed out in the last quarter of 2019 and there was a lot of selling. The tax-loss selling became extreme, and a lot of people had given up on the sector,” said Greg Taylor, portfolio manager and chief investment officer at Purpose Investments, which runs the Purpose Marijuana Opportunities Fund.

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Investors are getting more confident that the pricing is right Jason Wilson of ETFMG Alternate Harvest

“But the year started with a couple of good headlines especially regarding Ontario’s retail store rollout, and then you had some decent numbers coming out from some of the companies. So part of this uptick is also a short covering rally that’s going on here,” he added.

Over the last four trading days, the Canadian Marijuana Index, which tracks the top 16 Canadian cannabis stocks, rose by almost 20 per cent. Horizons Marijuana Life Sciences Index, another pot ETF under the ticker HMMJ, rose by 17 per cent starting Monday — HMMJ had lost more than 50 per cent of its value through the course of 2019. Taylor’s own fund, was up by about eight per cent this week.