Aug 18, 2020
Cannabis Investing is Growing w/ Alan Brochstein of New Cannabis Ventures
- BRT S01 EP28 8-16-2020
Things We Learned This Week
- New Cannabis Ventures covers the Cannabis industry, from investing ideas, news, conferences, & the financing inflows
- Many Cannabis Cos' not great Investments yet, over-valued, still struggling with cash flow - Cannabis stocks up 2020, but far off from higher valuations from 2018
- 3 Waves of Cannabis: Wave 1 – CO and WA legalized, wild west / Wave 2 – Canada legalized / Wave 3 – March 2020 pandemic
- Control Taxes / Capital / Assets - reduce taxes, use Leverage, passive income to grow wealth efficiently
- Business Owners concentrate on Earning $, need Good Advisors to Protect & Grow wealth after, reduce taxes, structure LLC right
Guests: Alan Brochstein CFA of New Cannabis Ventures
https://www.newcannabisventures.com/
https://www.linkedin.com/in/alanbrochstein/
https://www.newcannabisventures.com/about-new-cannabis-ventures/
Premium - 420 Investor
https://www.newcannabisventures.com/420-investor-subscription/
Alan covers the Cannabis industry, from investing ideas, news, conferences, and where the financing is coming from.
New Cannabis Ventures is a news & information platform offered by NCV Media, LLC that highlights promising companies and influential investors in the cannabis industry. NCV is a cannabis-centric marketing & communications company.
Vision
Our vision is to become the leading provider of relevant information in the cannabis industry by contributing original content and curetting quality news on the most promising businesses and influential investors, and helping to bridge the gaps between cannabis industry entrepreneurs and investors.
Mission
The cannabis industry is quickly transforming from the black market to one that is highly regulated but quite complex. Rapid change, federal illegality, stigma, and confusing regulations all contribute to difficulties in connecting with entrepreneurs, investors, and professional service providers. While much progress has been made, it remains extremely challenging to identify legitimate companies, real investors and capable service providers. New Cannabis Ventures informs and connects all of those who seek to contribute to the success of this new industry.
About Alan:
Based in Houston, Alan leverages his experience as founder of online community 420 Investor, the first and still largest due diligence platform focused on the publicly-traded stocks in the cannabis industry. With his extensive network in the cannabis community, Alan continues to find new ways to connect the industry and facilitate its sustainable growth. At New Cannabis Ventures, he is responsible for content development and strategic alliances. Before shifting his focus to the cannabis industry in early 2013, Alan, who began his career on Wall Street in 1986, worked as an independent research analyst following over two decades in research and portfolio management. A prolific writer, with over 650 articles published since 2007 at Seeking Alpha, where he has 70,000 followers, Alan is a frequent speaker at industry conferences and a frequent source to the media, including the NY Times, the Wall Street Journal, Fox Business, and Bloomberg TV, and has written columns for Leafly and Forbes.
Notes:
Alan – CFA w/ investment background, 7 years Wall St, and bond biz, equities, writes on Seeking Alpha
New Cannabis Ventures (c 2015) Cannabis business and investing news, VC investments, etc.
420investor.com (c 2013) – subscription investor site for cannabis.
Two Main partners, Alan and Joel, plus 3 part times.
Cannabis stocks are challenging with regulations, federal illegality, legal in Canada and major stocks listed there.
When Alan started in industry in 2013, penny stocks in cannabis
Wave 1 – CO and WA legalized, wild west
Wave 2 – Canada legalized
Wave 3 – March 2020 pandemic
- – industry shifted, more mature for institutional investors
Alan good at relative value, compare like-minded business, i.e., like Real Estate valuation - Absolute values are difficult to do
Investing – Cannabis stocks, ETFs, REITs – penny stocks to being on major indices
Federal Legal issues with banking – what banks will work with Cannabis, and give loans
Fintech banking for Cannabis – Paypal, merchant services, etc.
Private equity in Cannabis like Gotham Green Partners and Pelorus Equity Group
Canadian cannabis companies stocks are over-valued
MSO (Multi State Operator) in US as legal state by state, large ones are doing well FCF
Many cannabis companies not great investments yet, still struggling with cash flow.
Cannabis stocks up 2020, but far off from higher valuations from 2018 (overvalued).
Growth in cannabis companies is poisitive. Example : like valuing tech companies like Amazon in 2000.
Check management and access to capital as barometers to access valuation.
Balance Sheet – intangible assets and goodwill line item
Alan does not own cannabis stocks, conflict of interest with Newsletter.
Research cannabis companies and act cautiously
Arcview Group - https://arcviewgroup.com/ fund that invests in alternative ideas like Cannabis
Benzinga Conference to learn cannabis - https://www.benzinga.com/
Per Alan, US cannabis market is under-capitalized. Private investors and family offices are doing the investing. Hard to get money when Federally illegal. Banks will not lend, too much risk.
Canada banks loan money. Example: BMO
Banks by state charter can take deposits and bank with cannabis.
Alan lost a bank account because of association with cannabis. People have lost life insurance because of contact with industry.
Federal funding at risk if they accept cannabis money. US cannabis companies can’t list on US Stock Exchange or NASDAQ.
MB owns IIPR (Innovative Industrial Property, Inc) stock, cannabis REIT, operate in Real Estate, traditional business working in cannabis industry.
Even if work in medicinal use, may not move legalization issue.
Bear case for legalization is if it becomes legal, have to compete with big companies like Phillip Morris (cigarette) or Budweiser (alcohol).
Keep status quo and get better on how to run business and get private investors.
Guest: Denver Nowicz, President - Wealth For Life
https://www.linkedin.com/in/denvernowicz/
https://twitter.com/DenverNowicz
Denver is an advisor with nearly 20 years experience working with clients in investments and insurance, designing retirement plans with a combo of both. He takes us through different strategies for clients to get the best allocations for their money over the long term. It is the Combo Strategy of both Offense and Defense, the synergy of the mix, not ‘All or Nothing’.
Denver talks about how the Fed Stimulus Has Impacted the Market & Investing Asset Prices, Stocks, Bonds & Cash Talks Tax Reduction and Financial Strategies
Notes:
Market was up 27% in 2019, but average investor not up as much,
2020 market recovered quick from Covid dip of March 2020
S&P Index carried by 20% of top companies - 80/20 Pareto Principle
S&P market breakup, maybe 20-25% are worth investing in, 50% not good, bad companies, some underwater (15-20%) living on debt – Zombie companies (cost of servicing debt eats at profit), not growing.
Rebalance Portfolio – Investors do not want to be too top heavy, so they sell some winning stocks (and losers) and take profits to balance overall portfolio.
Buffett & Vanguard tell people to buy Index Funds, whole market because average investor not doing research, study and work . Catch is, Buffett does not do this and most financial advisors don’t do research either, just put clients in ETF.
FED put stimulus money into system and helps prop up Zombie companies in S&P. If invest in 15-20 good companies, get best of S&P.
Opportunity Cost – if you put money in bad companies, you lose money, but putting money in good company & company grows faster = more profits. Some companies are propped up and kept alive by FED cheap money vs. good companies who take free money, grow faster.
Investing plan for Top 10% of income earners ($150K +) or top 5% ($250K +)
Need different strategies, not just 401K or stocks, not like other 90% of population
Wealthy diversify their assets / investments, stock market is just 25% of their investing
Control taxes – protect money from taxes
Control Capital - access to capital – use leverage properly at 4:1
Control Assets – acquire assets to create passive income streams
Wealthy does not put all their money in the stock market.
Every $1 lost to taxes = $8 in lost wealth
$1 at 7% (rule of 72), at 10 yrs = $2, at 20 yrs = $4, at 30yrs = $8
$50K lost = $400K (x8) lost over the long term
If you earn over $500K / year +, top 1% of income earners
The ultra wealthy know that you have to control taxes.
401Kdoes not reduce taxes, it defers taxes, and at $25K /yr, this will not move the needle enough, need major changes to reduce taxes, and propel wealth
Control capital – protect principal, lock in gains
Use leverage well at 4:1 multiple
Deploy different strategies to grow wealth and make $ millions, really scale wealth from $1 to $5 mil, or $5 to $10 mil
Assets –pull money from passive income & use for more investing
Create investing cycle and repeat to grow wealth
Tax advantage loop to grow money wealth, reduce taxes, and redeploy gained $ for more investing to grow wealth faster and more efficiently
Opportunity to compound up vs. reverse of losing $
Opportunity cost where you lose money to taxes
Have to reduce taxes – you will not make enough money in ROI to mitigate taxes & the money lost
The more your income grows, more advantages to tax deductions
Typical business owner needs to learn this, get good advisors to limit.
Tax Code provides guidelines, rich get richer.
Tax exposure lessoned, then put money in right place to maximize LLC and business corporate structure - move money properly
Advanced Tax Reduction Strategies – Conservation Easement, Foundations
Most CPAs do not know these strategies because 90% of their clients have 1040 / W2 tax return. Do not have business income. You need the right CPA, right advisors to handle your growing situation.
Business Owners concentrate on making money (sales) and grow business, need advisors to protect their money and grow it passively + protect from taxes.
Link to Taxes Show on 10/31/2021 w/ Denver: Here
Link to Offense / Defense Show on 6/6/2021 w/ Denver: Here
Link to Shows, Denver was a Guest: Here
Cannabis Topic: https://brt-show.libsyn.com/category/Cannabis-Hemp-Marijuana
Best of Cannabis on BRT:
https://brt-show.libsyn.com/size/5/?search=best+of+cannabis
Investing Topic: https://brt-show.libsyn.com/category/Investing-Stocks-Bonds-Retirement
More 'Best of Investing': Here
‘Best Of’ Topic: https://brt-show.libsyn.com/category/Best+of+BRT
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