Takeaways from Our Conversation with a Cannabis Investing Pro

August 30, 2022 by

Cannabis sales continue to rise, and states continue to legalize it.

There may be a few clouds in the cannabis industry forecast, which have some specialty brokers dealing with these challenges. But overall, the outlook for cannabis is upbeat. Sales for 2022 are going up, reaching over $35 billion this year, according to BDSA.

Through all the ups, and occasional downs, one rarely hears overwhelmingly positive things from cannabis stocks. It’s largely guarded optimism.

A U.S. News & World Report article in mid-August, “7 Best Marijuana Stocks to Buy in 2022,” called the outlook for cannabis stocks “more modest” than the outlook for cannabis sales. Some stocks they did like were Cresco Labs, Cronos, Trulieve, Verano Holdings.

There was a story in mid-August from The Motley Fool explaining why Canadian cannabis stocks soared on a recent Monday morning, with Tilray, Canopy, and Aurora all spiking in early trading. The Motley Fool wrote that the catalyst may have been an interview Tilray CEO Irwin Simon gave, stating he believes legalization in the U.S. would open up a $100 billion opportunity for Canadian growers.

Yahoo! Finance featured 13 stocks they’re high on, but there were not a lot of surprises. Verano, Green Thumb, Curaleaf, Trulieve.

Many listeners of the bimonthly Insuring Cannabis podcast are likely insurance brokers, carrier executives, claims managers, lawyers, or risk managers, so cannabis stock investing may not make their list of top concerns or interests.

However, getting rich quick was not the point of the latest episode. The producers of the podcast felt a little knowledge about this area of the cannabis industry may be interesting as well as useful, so we spoke with Alan Brochstein, a certified financial analyst, who founded 420 Investor, and New Cannabis Ventures, a curated content aggregation site focusing on the most promising companies and investors in the space.

Following are takeaways from that conversation.

Brochstein was pressed for some tips, and asked where the market goes from here?

He called himself “a bull,” and maintained that the market has bottomed, but cautioned the upswing from the low is not likely to make things look like a “V-bottom.”

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“To sum it up, I think that we’re going to do better in the future. It’s not a V-bottom,” he said. “If somebody’s listening to this and they think it’s a great time to get in, they’re probably right. Are they going to get rich in a month? Probably not. It’s going to take a while to play out.”

Brochstein has on his watch list all the big public cannabis companies that immediately come to mind (Tilray, Aurora, Truleaf, Canopy), which are among 32 he tracks closely to advise investors.

One area of cannabis stocks he believes many investors ignore, but shouldn’t, are companies that provide ancillary products and services to the industry – many of which are knowns as “non-plant-touching businesses.”

He believes these companies have promise, but as is his advice on the more popular plant-touching companies, he believes a light touch is best.

“I think that if there’s one big takeaway from me today, if you’re going to invest in cannabis, don’t put all your money in ancillaries, but don’t put no money,” Brochstein said. “It’s actually 41% of my index, and I think these companies are good and they trade on the NASDAQ and so they’re open and there’s good reason to pay attention. I think.”