Cannabis Stocks Getting Better? with Alan Brochstein

alan brochstein

Alan Brochstein of 420 Investor walks us through publicly traded cannabis companies. He makes important distinctions between the Canadian and US traded cannabis stocks and looks ahead to what will be the tipping point to look for.

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Matthew: Hi I’m Matthew Kind. Every Monday look for a fresh new episode where I’ll take you behind the scenes and interview the insiders that are shaping the rapidly evolving cannabis industry. Learn more at www(dot)cannainsider(dot)com. That’s www(dot)cannainsider(dot)com. Are you an accredited investor looking to be part of some of the most sought after private cannabis investment opportunities? Get on our free private investment alert service at www(dot)cannainsider(dot)com/invest. Once you have subscribed to the investor alert service you will get access to curated opportunities that the public will simply never see. Again that URL is www(dot)cannainsider(dot)com/invest. That’s www(dot)cannainsider(dot)com/invest. Now here’s your program.

The different ways you can invest in cannabis businesses and cannabis business can raise money is changing. There are a lot of pitfalls and opportunities that come with investing in any new market. To help us walk through the cannabis investing landscape is Alan Brochstein of 420 Investor. Alan welcome back to CannaInsider.

Alan: Hey Matt. Thank you so much it’s great to be back.

Matthew: Alan to give us a sense of geography can you tell us where you are in the world today?

Alan: I am smack dab in the middle of Houston, Texas.

Matthew: Great. Alan we had you on a couple years ago and we were talking about cannabis investment then but can you tell us a little bit about how that’s changed in the last couple years?

Alan: Yeah sure. Actually this is my third time on. I had a really good time with Jay Czarkowski.

Matthew: That’s right, that’s right.

Alan: Yeah, yeah, yeah but that’s been a long time since that first one even though the amount of months that’s passed may not be that great. I have to answer that question two ways Matt. First of all things have not changed that much unfortunately but at the same time they’ve changed a lot and so the ways they haven’t changed and I know we’ll talk more about this is the wild west mentality of the penny stocks remains. So that’s unfortunate and I mean I guess I should be thankful that’s why my subscribers at 420 Investors stay with me because it is just very; a lot of potholes pun intended there when it comes to investing in publicly traded cannabis companies.

But I’ll tell you what’s changed; two things. First of all the environment for the overall industry is improving and so one of the things I talk about a lot at 420 Investor is to be careful about the correlation between the stocks and the industry. They’re not the same because unfortunately most of these penny stocks aren’t real cannabis companies. So that’s a difficult lesson for people to learn. So we’ve had a lot of progress since I was on with you the first time. The CARERS Act that was introduced a little over a year ago and a lot of other legislation. We are now seeing the real beginnings of the Federal government trying to figure its way out of this war on drugs. How they can remove marijuana from that debate and we’re not quite there yet but I think anybody looking at this industry has to appreciate that and also at the same time we’ve really seen a lot of progress in the industry with more states moving forward all these experiments that have been going on.

Nothing is perfect but even Governor Hickenlooper in Colorado who was an opponent initially; certainly not an advocate has come full circle now and sees the real potential. So I think that part is all good and I’d say also from the stock investors perspective we’ve seen the development of the Canadian market and we can talk more about that later but I think that’s one of the big differences between now and when I spoke with you in I guess 2014 about I think we have some real cannabis companies that people can invest in and there’s probably one in the U.S. as well but that’s the big changes Matt.

Matthew: Let’s rewind a little bit and talk a little bit about your credentials and your background so people will get a sense because not everybody may have heard the first interview. I just want to give people a sense of why you’re involved in cannabis investing and so forth.

Alan: Sure. So this is not where I would’ve ever imagined I would’ve been. To back it up a lot I was a capital-l Libertarian in high school. I never tried cannabis back then; I did in college but I was out there arguing for legalizing cannabis as a 15 year old and I worked in the Libertarian party well it was called marijuana back then obviously but so I had a long history of being pro cannabis and then obviously like most people in college I was definitely pro cannabis but I got married when I was 25 and I guess I was dating my wife for a year before that and that’s how I know. That’s when I didn’t use cannabis from age 24 on until all of a sudden I stumbled onto the cannabis publicly traded stocks in early 2013 and I was horrified.

I looked at these companies that were trading and they were a joke and they remain a joke for the most part; those specific companies but I started to write about them. I had a very large following on Seeking Alpha at the time and tens of thousands of people that were following my normal investment articles that I was writing on Seeking Alpha and I was an independent analyst working with several different institutional money managers at the time and just started to spend more and more time on the sector and brought myself up to speed on the medicinal benefits, a lot of the social aspects, social injustices, the economic benefits, public policy benefits, and really learned more and more about cannabis and six months later I launched 420 Investor.

Matthew: Okay and what is you have the initial CFA after your name what does that mean?

Alan: Well so I joked that it stands for Cannabis Financial Analyst but it actually stands for Charter Financial Analyst and a lot of your listeners may not be familiar with that but the CFA Institute which oversees that they have been doing this I think since the 60’s or the 70’s. I earned mine in the mid 90’s and to earn it you have to pass three tests. I just barely passed the last one but I did pass on the first three tries and so the charter basically signals that you have made a commitment to learning a body of knowledge and that you embrace strong ethics which we know is lacking in the financial industry unfortunately. So that’s what it is.

Matthew: Now that’s an interesting background to get into the cannabis finance space. When you’re looking at the over the counter stocks which some people call perhaps penny stocks, they are extremely volatile. Is there room in everybody’s portfolio for some cannabis stocks do you think?

Alan: So I think that that’s a very dangerous assumption. These stocks are extremely volatile Matt and for the most part even the ones that I think are legitimate companies being on the OTC or over the counter really makes it difficult. I started 420 Investor with a lot of optimism. I maybe should have called 420 Trader but hope springs eternal. Here we are almost three years later and it’s still pretty much a trading mentality and you have to be very careful. So when you say is there room in someone’s portfolio I’d say only for those that are fully aware of the risks of the volatility and the risks of fraud. The OTC consists of companies that either file with the SEC or if you can believe it many that don’t even file with the SEC. So I don’t think there’s any room for a company that won’t file with the SEC in anyone’s portfolio for the long term.

Matthew: That’s pretty funny. I can’t be bothered to file.

Alan: I’m too busy defrauding people.

Matthew: Yeah.

Alan: So yeah. No I think we’re seeing some progress and we’ve seen some companies come to market in a more respectable way but even that we’re just not there in terms of liquidity, in terms of earnings things like that. The real cannabis industry is outside of the publicly traded sector.

Matthew: Now just how volatile are we talking about here when we say cannabis stocks are volatile?

Alan: So they vary. Sometimes they just sit there to be quite frank which can be a little bit frustrating for a lot of people but a really good story this year; one that I followed. This one goes back as a matter of fact if I could rewind a little over three years ago when I started looking at the space this one was there. It’s Terra Tech and there symbol is (TRTC).

Matthew: Sure.

Alan: And I think it’s probably the most widely held name now most actively traded and I followed it very closely really since the summer of 2013 and it’s probably the only stock that was around back then that was a U.S. company cause there is one foreign company we could talk about but the drill the rest of them aren’t real and they’ve always filed with the SEC and it’s been a mess. I mean it’s been a struggle and it’s a real company but it’s been a struggle and so when you ask about the volatility it was sitting at really between 8 and 10 cents for about six or seven months in the back half of 2015 after the end of 2014 they got a license or several licenses in Nevada and the stock had spiked up to as high as about 60; so 60 cents down to 8 cents in about five or six months. It bases between 8 and 10 cents roughly; maybe a little bit higher than that for seven months. The next thing you know it’s at 60 cents again and now it’s back today down to 30 cents but so that probably gives people a sense of the volatility. In early 2014 there were a lot of stocks that went up 20 fold, 30 fold, 40 fold that was just crazy.

Matthew: Wow, wow and there’s a momentum to that where people go oh my God it’s doubled now I’m going to jump in and then they say it’s triple and other people jump in.

Alan: Yeah.

Matthew: And it’s like a crazy train.

Alan: Yeah and you go to the grocery store and when the prices go up you cut back. You find something else but stocks don’t work that way. It’s the exact opposite. When they’re going down presumably getting a little bit better people want to sell. They don’t want to buy and when they’re rising people want to chase them. So yeah you got that one nailed.

Matthew: So you mentioned the OTC stocks or over the counter stocks in one bucket is companies that don’t file and in another bucket is companies that do file. For both those buckets if you were to put them together what percentage would you say are quality enough to even look at?

Alan: So okay there’s not a single one that doesn’t file that I would put into that camp even if they did file. So I understand why they don’t file. Of the 360 names or so that I’m tracking and if I pull out the Canadian ones that have U.S. listings maybe we’re down to about 340 or something like that. I don’t see how there’s more than about 20 that are even worth paying attention too.

Matthew: Wow okay.

Alan: And paying attention too does not mean invest in them either Matt so.

Matthew: They have potential so you’re watching.

Alan: They have potential and I have a focus list. One of the things; so I’ve been in stocks really since 1998. I was in bonds before that. Investment is my whole career since 1986 but one of things I started to do and I found really helpful especially when I was working for multiple clients or managing other people’s money as well is to create a watch list. So a watched focus list is the same concept and a lot of investors in general don’t understand that concept. They just get an idea on Tuesday and they buy it on Wednesday. That’s not the way I roll and so just when it comes to investing in general I follow the technicals or the charts on the watch list. I keep up with the fundamentals and the watch list so I’ve done the same thing at 420 Investor where I create a watch list and sometimes this is difficult for people to understand.

I have some real crap on that watch list but it gets on there because it’s actively traded in liquid and it represents the market. So the best analogy I could see would be not every company in the SNP 500 is really a great company necessarily. Some of them aren’t going to be around in a few years. They’re going to fail but at the same time you should pay attention to them because they represent the market. So in that same vein a lot of my focus list are these crappy names that people trade because they have Q Tickers or whatever it is and then I have some other names on there that are decent companies that trade so that’s a really good one and then I have some companies on there that hardly ever seem to trade but they seem like they have some promise. So that’s kind of what I do but my focus list is 25 names right now. It’s very heavily dominated by Canadian names. If you strip those out we’re below 20 and I don’t see how I can ever recommend more than 10 of those maybe if that gives you a sense of how narrow the universe is.

Matthew: So you mentioned fundamentals there and I appreciate looking at the fundamentals but I also have come to the realization that we don’t really live in a free market economy. We live at least in the financially we have a command control economy where we have the Federal Open Markets Committee at the Federal Reserve that dictates the price of money. They also do a lot of crazy, desperate shenanigans like quantitative easing and through kind of opening and closing these flood gates not only do we experience inflation and higher asset prices but it distorts markets in a lot of ways. Does that make it more challenging for you to say well here’s what I think from a fundamental point of view because the fundamentals are somewhat distorted because the mal investment genesis being these central banks that control everything?

Alan: Well so let me acknowledge that I agree with what you’re saying but I’ll say I don’t think it really impacts to a great degree the cannabis stocks. So one of the manifestations of what you say if money is too easy then people will borrow and they’ll speculate and so that feeds into real estate and things like that. I don’t think that really feeds into the cannabis sector. It’s too much under the radar. The OTC really keeps out 90% of the people in the world would never touch an OTC stock. So I don’t think that there’s a really big reach from these overarching market forces into the cannabis stocks but I would say it’s a very valid criticism. I’m one of the few people that really does look at the fundamentals which is not fun trust me on that. Not fun to look at the fundamentals of these publicly traded stocks but I do it. So I have to say that in the long run the stocks are going to attract their fundamentals but you mentioned the volatility earlier price momentum, technical’s really dominates right now.

Matthew: Now the Canadian market is really interesting in a lot of ways. What Canadian stocks do you look at? Are there any that stick out and how do you think about Canadian stocks in general?

Alan: Sure. I’ve probably since our first interview I’ve been to Canada twice and the last time was really instructive. The first time I was in Vancouver. The second time I was in Ontario; different parts of Ontario and I got to meet with in the facilities of three of the leading what they call licensed producers at the time (17:05 unclear). So I’ll talk about them all in a moment but so I’m very grateful for Canada for a lot of reasons. Number one it’s been great for my subscribers at 420 Investor. Maybe we got lucky and for those that aren’t listening what happened was so they have a federally legal medical cannabis program which is pretty cool but it was pretty nasty the way they set it up mail order only and flower only and look what’s going on in the United States concentrates are really big.

It’s still mail order only and they now certain oils but they’re not so great. So the program is not great but it’s growing and as a matter of fact it’s growing at about 30% quarter over quarter. That comes down to about 40 million residents. You would expect ordinarily to have maybe 800,000 to a million potential patients in a country with; that’s based on looking at certain states in the United States and Israel places like that. Well that whole system is up to about I estimate about 55,000 right now. So it’s still early. So investors should at least go on the fact that unlike in the United States where all these cannabis companies have to deal with 280E or banking problems, the cash problem. All sorts of problems that companies here have to (18:33 unclear) with it’s perfectly legal in Canada and so that’s a good thing.

So we were excited about just that and then in October, Justin Trudeau who is running on a platform that included legal cannabis for adults 19 and over he won. It was amazing because it wasn’t supposed to be a win. It was supposed to be a minority; a win but with a minority and so that set off a huge rally in the Canadian stocks and so the people that were in the stocks made a lot of money. Luck? I don’t know whatever.

Matthew: Yeah.

Alan: I didn’t predict it was going to happen but you have to be in the right place at the right time so Canada now looks like it will legalize and there are; I’m tracking. I have an index. I think it’s the only index out there where I track the Canadian publicly traded stocks. There’s eight licensed producers out of about I think there is about 20, 22 total right now eight of them that are actually trading on their own. Then I included ninth company that makes investments in several of them and owns one 100% so I mean if you want to talk about these companies we can but these companies is able to raise capital, they have decent liquidity, some of them do anyways and they have a good future Matt.

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Matthew: Now let’s just maybe pick out one or two that you think are the most interesting.

Alan: Sure. So I’m going to tease any of the listeners. If they want to know the one I like the most I’m not going to talk about it but I have one I really love but I’ll talk about the ones that people probably want to hear about which is; so the biggest one is Canopy Growth and that was a merger between Tweed and Bedrocan. Those were two of the ones that I went to visit and I started off being a little bit leery of at the time Tweed because they were first to market and they were talking about first mover advantage and it didn’t sound right at the time but because of a huge delay by Health Canada which oversees this system. The first movers actually did have an advantage. So Canopy Growth has put together just some incredible assets. They have a massive greenhouse, they have a huge facility that used to be a Hershey’s factory and they bought Bedrocan which is more of a medicinal brand. So they’re very well positioned for legalization ahead as well as for the development of the medical market and so that’s the biggest one.

It may be a little bit expensive but Matt you’ve been around. You’ve seen this before the good stocks usually are expensive. That’s the way it works. So when I do my CFA type of analysis I come up with there’s some cheaper alternatives all things considered to Canopy Growth but Canopy Growth certainly is in the pole position right now and it’s there’s to lose but it’s not a one man; it’s not a winner take all type of thing. The other company that I like to talk about it’s really an interesting company and it’s called Aphria and it’s really gained some popularity. It has the best chart I would say of all the Canadian’s. It’s trading above its initial first trade when it went public and above the last private raise. Every raise has been at a higher and higher price.

What separates these guys they’re in Leamington, Ontario. These guys were growing flowers like not the kind you smoke but real flowers and they’re farmers. They know how to grow. What’s really kind of the greenhouse capital of North America and I went there and visited with them. Great people. They have a CEO who comes from the nutraceuticals industry and they take a very; I mean these guys are not very savvy when it comes to cannabis on any sort of personal level but they’ve brought in their expertise and I think that’s a really great story and I like Aphria as well.

Matthew: Let’s pivot to an American OTC stock MassRoots. Can you give us a little background on MassRoots?

Alan: Sure.

Matthew: Where they are now and what they’re trying to do in terms of getting on a different exchange?

Alan: Yep. So for those that don’t know of MassRoots they really go after a very big problem that people that pay attention to the cannabis industry know about which is it’s very difficult to advertise. We’ve seen all sorts of things where you can have a Facebook account with 10,000 followers and then the next thing you know you’re shut down and they don’t even explain why, the rules aren’t real clear. We’ve seen Google ads turn people down. It’s very hard to use digital. It’s very hard to use things like billboards or I’ve seen people get in trouble in Boulder, Colorado just for sponsoring a not for profit. Just putting their sign in a not for profits booth at some sort of event. So what MassRoots has done is it’s built a close community. They have about 900,000 registered users now and it allows people to be semi anonymous so they can post their cannabis related content without worrying about stigma or job related security issues; anything like that so and the idea is MassRoots creates this community and then advertisers can tap into it.

And this company became public in a very good way. They did what’s called an S1 instead of a reverse merger. A reverse merger is typically how an OTC company comes to life. It’s basically a shell. It’s not the real word because there’s a meaning for show but it’s basically you take a stock that’s not trading and it’s not worth anything and you find a real company and you push it in and so that’s not what MassRoots did. They actually started fresh and filed with the SEC. Went through what’s called the S1 process and started trading publicly. I would have to say a year and a month later it’s been a little bit disappointing. The stock has had some fits and troughs but at this point the stock is back below a dollar, it has a series of lower highs and lower lows since it started trading publicly, and they just reported; they just started to monetize and they probably started a little bit too early but this quarter that end in March 31st they had 93,000 in revenue and they had 150,000 in the prior quarter.

So they’re not moving in the right direction but it’s a great concept. They’ve done a lot of things right. I try to give them the benefit of the doubt and I think one of the things you asked about is the NASDAQ and that’s if any company has a shot of moving to the NASDAQ it will be a technology company like MassRoots. It’s probably premature for them to do so but they have filed to trade on the NASDAQ and I assume they’re still waiting to hear back. They first started talking about this at the end of August and they filed I believe in February. So this has been a long drawn out process. If they succeed I think it would be positive for two reasons; number one it would give them better liquidity and allow them to raise capital more easily and number two it would help them build their community because it would build further awareness.

Matthew: Apart from MassRoots are there a few other names in the cannabis space we should know about outside of MassRoots and Terra Tech?

Alan: Yeah. So I talked about Terra Tech and just so people understand and I do run model portfolios. I’ll disclose. I like Terra Tech a lot but I have zero position now. I have zero position in MassRoots right now. SRNA would be another one. I know you know that company.

Matthew: Yes I do its right in Boulder.

Alan: I think they’re a real company and I think I might have mentioned earlier that these OTC companies have to contend with a lot of issues. It’s hard enough being a cannabis company; it’s hard enough trying to get people to pay you when they have wheelbarrows of cash. There’s all sorts of issues that make it difficult to work in the cannabis industry in general but when you’re a penny stock it’s even harder and let me give you the positives on SRNA are; one of the big problems with the cannabis industry is it sucks up energy. The lighting creates a lot of heat and then you have to cool and so SRNA has some technology to address this using chilled water and they have some dehumidifiers as well and that’s been their bread and butter and then they have a new product which has some patent protection to it reflectors some of which are cooled with water and then they have a future product that they’re developing as well which is essentially a hybrid greenhouse that also integrates their technology. So I’m not going to get into the negatives too much but this is a company; I just told you I was kind of disappointed MassRoots had 93,000 dollars in sales. These guys just reported 2.5 million in sales.

Matthew: Great.

Alan: And so the sales part is going in the right direction. They’ve struggled historically with too much cost. I’ll tell you a funny story quickly which was they sent out a holiday card at the end of 2014 when they had a million in revenue for that whole year and they sent out a holiday card with 30 people in it and all my subscribers like whoa this isn’t going to work. You can’t have 30 people working for a company with a million in revenue. Well they’ve grown a lot since then and they’ve cut back but the moral of that story is you don’t have to make a profit Matt but you have to be in a position to scale and you can’t just be throwing money down the drain. This company had really bad management. The founder picked the wrong partners to start with and he spent a lot of time fixing it. I think they’ve addressed it now. I don’t know if you ever met their new CEO that they just named yesterday. He started June 15th as CEO but he’s their COO now, Trent Dusay. Do you know him?

Matthew: I think I have, I think I have.

Alan: Yeah. So and I don’t know his cannabis experience so I always tell people when you’re looking at these companies whether they’re public or private you want to find teams that have a good balance of just normal business experience; hopefully successful business experience and so this guy built an IT outsourcing firm and sold it for millions of dollars so that kind of fits the bill but you also want to find people that do have that cannabis expertise. Well Steven Keen the Founder of Hydro Innovations which was merged into SRNA he knows cannabis very well. So that’s something that when people are looking at SRNA they should take into account that you can check that box. The management there now reflects both sides of the equation; the cannabis experience and the real world business experience.

Matthew: Institutional investors like pension funds and mutual funds and insurance companies need to trade much larger volume of stocks and securities and is currently available in the cannabis marketplace but do you see the sentiment changing at all where some of these big institutional players are starting to maybe think hey at some point we may look at this?

Alan: So mixed answer on that. We didn’t talk about GW Pharma but that’s probably the best publicly traded stock. It’s a biotech so it’s risky but institutional investors definitely invest in that one. We talked about Canada. They definitely invest there. Fidelity for one but there’s others so but when it comes to the rest of the space I mean your question pretty much answered it. There’s just not enough liquidity right now. A lot of times institutional investors are prohibited from buying an OTC stock. So we’re just not there yet but when you step back and look at the broader industry we’re definitely starting to see; in Silicon Valley we’re starting to see some traditional type of investors. These aren’t the type anybody listening to this would necessarily know very well but we’re starting to see that.

I thought we’d see these cannabis funds do really well. That’s been slow to develop. I’m hopeful that we’ll see more institutional interest. I partnered with somebody who works with institutions. What he does is sets up these lunches where a company will come in and typically a public company and discuss their company and he answers questions and so the first one he did was with a private company. It was supposed to be first; got delayed but he took Canopy Growth which is as I said earlier Tweed and Bedrocan to San Francisco and Seattle and the institutional interest was very high. So I’m hopeful that we’re going to move there but we have to have better companies and we have to have better listings I think.

Matthew: Okay. How about family offices, offices of high net worth individuals or families do you see that?

Alan: Definitely.

Matthew: They’re getting interested okay.

Alan: Yeah and there’s some people that are having events around that and I hear from people every now and then and they always make me promise not to say who they are but it’s some pretty impressive people.

Matthew: So who are they Alan?

Alan: Yeah I’ll tell you.

Matthew: Okay here’s a challenge for you. If I were to give you a 100,000 dollars in cash right at this moment and say it had to be invested in cannabis stocks by the close of the next trading day and you’d have to leave the funds invested for at least a year what stocks would you pick?

Alan: Do I get to keep the money at the end or no?

Matthew: We’ll talk about that later.

Alan: Oh okay. Well I don’t know if I want to answer this one. I have a model portfolio and so I’m not going to answer that one. People pay me a lot of money to answer that one and I’m not giving that away for free.

Matthew: Okay, okay.

Alan: But I would say this I am not; that whole premise doesn’t work unfortunately to buy and hold for a year. I just want people to understand that. I’m very careful with what I say and how I say it to my subscribers. Unfortunately a lot of people came in. We talked about this earlier how people like to buy when things are going up and in 2014 I had; my subscribers went from 165 to 2,000. We’re down below a 1,000 now but a lot of people chased when those prices were going up. Now a lot of these people stayed with me and some of them didn’t but some of them got down right suicidal. They were doing all sorts of things that they shouldn’t have been doing. Poor risk management but I’m very careful what I say. I will say this as a tease to anybody that wants to connect with me later. There’s one stock that I’ve told my subscribers I think it will double by the end of this year and triple by the end of the next year.

Matthew: Hmm... interesting that is a tease yeah.

Alan: I won’t say that (35:06 unclear) I mean what we usually talk about is how this stock looks good right now compared to that stock. That type of discussion it’s all relative not absolute.

Matthew: Right, okay. Fair enough.

Alan: I would tell you not to do it is what I would tell you.

Matthew: Okay.

Alan: There’s your answer.

Matthew: It’s a hard impulse. I mean you’re talking about people are getting suicidal but it’s a hard impulse to train yourself for good stocks to buy low and sell high.

Alan: Yeah.

Matthew: Because your impulse is when it’s going down it’s going to go down further and I’ll wait and your impulse when it’s high.

Alan: Hear this out.

Matthew: Yeah. So it’s a muscle that needs to be trained. I’ve been trying to do that over the years. I’ve gotten better at it and especially when I talk to people; senior citizens that are savvy investors. They’ve just seen the cycle repeat so many times. Again we’re talking about quality stocks.

Alan: Yeah.

Matthew: That they can say oh well they’re buying now what everybody else is depressed about.

Alan: Right. That works in quality.

Matthew: Yeah.

Alan: But unfortunately I mean just to give you a little bit of a hint Canada is quality and it drops off after that real fast in my opinion.

Matthew: Okay, okay cool.

Alan: There’s something about federally legal. There’s something about the fact that not everybody has their eye on Canada so a lot of reasons. I’ve been proselytizing Canada for a while. I actually the last time I was in Denver was in October and I set up a conference; I mean a meeting there and I had Bruce Litton from Canopy Growth, I had Paul Rosen who just left Pharma King Capital, I had John Fowler from Supreme Pharma, had Adam Greenblatt who runs a clinic, and I had Greg Engle the CEO of Tilrey which is owned by Privateer.

Matthew: Sure.

Alan: On this panel and just to go to that whole point about contrarianism. I thought this was going to be a huge draw. This is the first time we had these leaders from Canada in the United States on the same podium and there were like 15 people in the room. It was a complete embarrassment.

Matthew: Wow those are big names.

Alan: Yeah and so and then okay just to back it up that was October 12th I think. Well the election was a week later and the stocks like doubled. It was a great time. I hope that the 15 people that were in the audience then bought at least one of those stocks but anyway.

Matthew: Very interesting. Alan let’s talk a couple personal development questions here. As you look over the arch of your life is there a book that stands out as having a huge impact on your personal or professional development that you would recommend to CannaInsider listeners?

Alan: So I hate to do this. I listen to all of your interviews. I appreciate that you do them all. I listened to Roy Bingham a few weeks ago and he took my book and so rather than come up with a different book I’m going to go with the same one. The author is Clay Christensen and it’s called “The Innovators Dilemma.”

Matthew: Yes.

Alan: And he has a whole series of books by the way that were similar to this. The Innovators Dilemma.

Matthew: How has that helped you frame?

Alan: So here’s the thing I’ve been an equity analyst since 1998 and one of the things I’ve always struggled with is what makes a company a good company and I could probably throw another few books too but a lot of times you’ll have a company that’s considered to be a great company but then they get their clock cleaned by new competition.

Matthew: Yeah.

Alan: And this book really addresses that and the need to cannibalize yourself. It’s a weird thing and so there’s going to be a lot disruptive technology in the cannabis industry over the next couple decades that’s why I think this is a really appropriate one and I’m willing to still Bruce’s; not Bruce, Roy Bingham’s book.

Matthew: Now how about is there a tool web based or otherwise that you use on a daily or weekly basis that you would say is indispensable tool to your work life?

Alan: Sure. I have a bunch of them. We can probably do a whole; I’m a small business operator and a new cannabis business I have a partner. At 420 Investor I work by myself so I’m a one and a half person firm and so there’s a whole bunch of small business tools that I could talk about but instead I’m going to tell you one that I find extremely helpful and that’s LinkedIn and a lot of people don’t use it and I’m not sure why but I have created; I started this in late 2013. It’s a LinkedIn group called Cannabis Investors and Entrepreneurs and we have about 4,100 people now; a little bit over that and it’s just a great way to connect with people and I have found if I need to reach somebody in the industry and I don’t know them LinkedIn is very helpful at me getting to those people.

Matthew: Good point. I think for me anyway I see LinkedIn and I see it’s a vast network there’s a lot going on but I don’t really leverage it like I should so point well taken there. Alan as we close how can listeners learn more about 420 Investor and New Cannabis Ventures?

Alan: Yep and we didn’t even talk about New Cannabis Ventures much but I’ll give it a two liner in just a moment but 420 Investor which is a subscription based online community that’s Pretty easy to remember and for those that are kind of not so deep into it that they want daily or 24 x 7 information I also offer a newsletter that’s a monthly summary but even within the service we have people that seem to live on the site and they’re there all the time which I appreciate it keeps it fun and we have other people that just like; I send a really good weekly summary as well. So that’s half my life and then the other half is New Cannabis Ventures and New Cannabis Ventures is kind of my attempt to connect the private cannabis industry with investors and it’s a B to B content platform aggregate so in other words like when you do an interview I will summarize it, include a link so the people can listen to it, and they can hopefully decide they want to listen to it but for our clients it’s really a platform to help them connect better with our subscribers or our readers I should call them which number about 30,000 uniques per months.

Matthew: Great.

Alan: Or we have a newsletter that goes with that also so that’s easy and it’s free.

Matthew: Great. Well Alan thanks so much for coming on CannaInsider and educating us about the cannabis investment eco system. It’s always interesting to see how it’s evolving and next time you come on I’m sure it will evolve quite a bit more.

Alan: I sure hope Matt because between this time and the last time it hasn’t quite evolved as much as I had hoped but next time hopefully.

Matthew: Well at least we’ve got something going on north of the border to talk about.

Alan: Exactly. Alright thanks so much.

Matthew: Take care Alan.

If you enjoyed the show today please consider leaving us a review on ITunes, Stitcher, or whatever app you might be using to listen to the show. Every five star review helps us to bring the best guests to you. Learn more at www(dot)cannainsider(dot)com/itunes. What are the five disruptive trends that will impact the cannabis industry in the next five years? Find out with your free report at www(dot)cannainsider(dot)com/trends. Have a suggestion for an awesome guest on CannaInsider? Simply send us an email at feedback(at)cannainsider(dot)com. We’d love to hear from you.

Please do not take any information from CannaInsider or its guests as medical advice. Contact your licensed physician before taking cannabis or using it for medical treatments. Lastly the host or guests on CannaInsider may or may not invest in the companies or entrepreneurs profiled on the show. Please consult your licensed financial advisor before making any investment decisions.

Final disclosure to see if you’re still paying attention this little whistle jingle you’re listening to will get stuck in your head for the rest of the day. Thanks for listening and look for another CannaInsider episode soon. Take care. Bye bye.

Key Takeaways:
[1:30] – How has cannabis investing changed over the last couple of years
[4:37] – Alan talks about his background in cannabis investing
[6:31] – Alan explains what a CFA is
[7:37] – Is there room in everybody’s portfolio for cannabis stocks
[11:42] – Alan talks about the quality of OTC stocks
[15:15] – Alan discusses the fundamentals
[16:39] – Alan talks about Canadian stocks
[23:53] – Alan discusses the state of MassRoots and other companies
[31:11] – Alan talks about big institutional investors
[33:37] – Matt challenges Alan to pick one stock to invest in
[37:55] – Alan’s book recommendation
[39:24] – Alan’s tool he uses on a daily basis that is crucial to his work life
[40:41] – 420 Investor contact details

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The Five Disruptive Trends Shaping The Cannabis Industry Now