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Following these basic principles led me down a path to an industry that has always interested me: The Marijuana and Hemp Industry. Some consider these products as different industries and that may be an individual segregation but I like to keep things simple so they are one and the same to me.
When I asked a financial broker friend about his thoughts on the Marijuana Industry his firm’s quick response was “no one invests in farms due to the uncontrollable effects of weather conditions” – that was in response to a specific question about an “indoor grower”. Another response was “the Marijuana industry is like buying a lottery ticket, sometimes you win but most of the time you lose”.
This was the typical response from financial investors, the so called “Experts”. Even new cannabis investors know that there are production rules dictating all production facilities must be indoors. It soon became clear that the financial investment community, at this point in time, has no real grasp of what the legal Marijuana industry is all about. Fellow investors echoed these same findings. Thus a window of opportunity was identified. One of my first acts, was to subscribe to CANNAINVESTOR Magazine – it has an American focus but there is some clear Canadian content including Canadian companies on the much coveted “top 25” list!
Again, “Investing 101” reminded me when investing in Companies, ensure the Company has a market for their product. Just one article I came across published by Deloitte, titled Recreational Marijuana Insights and Opportunities, indicated a Base market of approximately $4.9 to $8.7 Billion, Ancillary markets $12.7 to $22.6 Billion and another $22.6 Billion of Potential Upside. Clearly, there is a huge market plus a tremendous untapped market that is just waiting to be unleashed.
Other key elements in my investment decisions included:
- Company Leadership Do the Directors and Senior Officers have a solid track record of success in the industry?
- Risk Factors Determine the factors which could potentially affect the Industry and the individual Company. With current Canadian and US political environments being the way they are in my mind it is not a question of if the Marijuana industry will be legalized but when.
- Cost Control Is the Company on the leading edge developing innovative methods or strategies to reduce business manufacturing costs.
- Corporate Vision Does the Company have solid Short, Mid and Long Term Financial and Operating Plans?