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Hatch Weekly: India bites back on Bytedance

Pot (still) smokin’ hot

Publicly traded cannabis companies have reported strong sales since Canada legalised pot last October and some US states approved recreational and medical marijuana use. It’s been a wild ride, and we're asking ourselves if cannabis partnerships are key to the industry's future?

Cannabis is no longer taboo

Thanks to significant investments and partnerships between marijuana sellers and blue-chip consumer companies, investing in cannabis has gone mainstream. Corona owner Constellation Brands (STZ) has a 35% stake in Canopy Growth (CGC) and recently disclosed that it may eventually boost its stake in Canopy to 50%. Marlboro-owner Altria Group (MO) invested $1.8 billion in cannabis producer Cronos Group (CRON), and Tilray (TLRY) is working on cannabis-infused drinks with Budweiser owner Anheuser-Busch InBev (BUD). Love is in the air, and many of these shares have soared – for instance, Cronosrocketed 89.4% in January, while Aurora (ACB), who is exploring potential partnerships, gained 82.3% in the same period.

Mergers and acquisitions are lighting up

Not content with sitting on the sidelines, others pairs of companies have also matched up in recent months as well: Molson Coors announced a partnership with Canadian producer HEXO Corp (HEXO). But perhaps the biggest move this year is Canopy Growth Corp's deal to pay US$300-million for the right to buy US cannabis company Acreage Holdings Inc. This recent announcement is just another sign that big business is betting on a marijuana boom. If the deal goes through it will be valued at US$3.4 billion, and will give Canadian Canopy a strong foothold in the lucrative US market, which is worth US$35 billion to US$50 billion, roughly ten times the size of Canada’s market.

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TikTok’s time might be up in India

China’s Bytedance is the owner of the popular short-form video app, TikTok, and is now valued at more than $75 billion following a new round of investment. So much for Uber being the world’s most valuable startup! This low-profile challenger from China has ousted them for the top spot.

Bytedance makes money move

Bytedance is the first Chinese internet company with a significant, genuinely engaged following around the world, which means it’s worthy of serious investor attention. TikTok (you may be better acquainted with Musical.ly, another Chinese lip-syncing app, which ByteDance purchased for US$1 billion in November 2017 and subsequently merged into TikTok) now has over half a billion people worldwide using it monthly. The app has been downloaded nearly 80 million times in the US – heck even Jimmy Fallon is using it! Vine-like but better, the app uses AI to surface interesting content and to empower creators to share moments that appeal to a global audience. Created by 35-year-old Yiming Zhang in 2012, Bytedance is the first Chinese company to tap into the lucrative social media appetite of Western nations.

Trouble in India

While it’s intent on world domination, TikTok has been blocked in India after a court ruled it could expose children to inappropriate content. The hugely popular app among Indian teenagers was unavailable to download from Apple (AAPL) and Google (GOOGL) last Wednesday. The move doesn’t affect the tens of millions of existing users in India, but it could be a setback for Bytedance, preventing further expansion in the fastest growing market in the world. The app was briefly banned in Indonesia last year, and in February, Bytedance was ordered to pay a $5.7 million fine in the US over allegations that it illegally collected personal information from children under the age of 13. Despite the controversy, Bytedance has plans to go public next year.

Invest like the Best: Benjamin Graham

In our 4th Invest like the best series, we’re taking a good look at Benjamin Graham the British-born American investor, economist, and professor known as the "father of value investing”.

Invest in education

Graham graduated from Columbia University and started his career on Wall Street at the age of 20. He even gave ol’ Warren B, the Oracle of Omaha himself, a leg up in the industry. In fact, Graham had such a significant influence on Buffett that he named own son after his mentor.

Value investing 101

As a value-based investor, you’re looking to buy shares in public companies that are trading at a price less than what they’re worth. Graham favours a strategy of sound analysis and then taking advantage of the ups and downs of a company’s share price with an active, buy-low, sell-high approach. Sounds like a lot of work? It is. But we’ll take investing advice from Graham who at 25 was earning more than $500,000 a year on the share markets. You’ll have to read the article to find out more about BG.

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