Investing in medical cannabis legal cannabis stocks

Investing
in Medical
Cannabis
Information about
Cannabis and Legal
Cannabis Stocks
A collection of articles from Cannabis Investing News to
help new investors in this market By Kristen Moran

Investing in Medical Cannabis Legal Cannabis Stocks
© 2017 Cannabis Investing News 1
Table of Contents
The Blooming Cannabis Industry: 2016 in Review...................................................................2
Cannabis Outlook 2017: Legalization on the Horizon ..............................................................6
Cannabis Outlook 2017: Companies On a High .....................................................................10
Task Force on Cannabis Legalization: Investors Be Aware .....................................................13
James Dines: Gold and Cannabis Blooming...........................................................................15
US Pot Stock Rally and Blair Report: Cannabis Analyst Weighs In..........................................18

The Blooming Cannabis Industry: 2016 in
Review
The cannabis market reached incredible highs in 2016 in the US
and in Canada. Here's what some analysts had to say.
The cannabis sector was one of the
hottest commodities in 2016, and it’s not
hard to see why.
To get some perspective on how the
marijuana sector has fared, putting it
simply, it has been slow to take off–until
recently. Over the last couple of years, the
cannabis market has flourished from almost
nothing into a $4 billion industry–in Canada
alone–according to the Globe and Mail.
Looking over to the United States, a report by ArcView Market Research projected the
cannabis industry to jump over $6.7 billion in 2016, and it’s only expected to increase
from there. By 2020, cannabis sales in the US are expected to grow to $21.8 billion.
As such, the Investing News Network (INN) had the chance to speak with Alan
Brochstein, cannabis stock analyst at 420 Investor, to see give a cannabis overview for
2016.
“I am glad to see the cannabis market look like it will finish positively for the first time
since 2013, ending a brutal bear market from early 2014 to early 2016,”he told INN.
2016 cannabis overview: voting for legalization in the US
Of course, voting for legalization of recreational marijuana in four US states is no doubt
one of the biggest stories to come out of 2016 in the US. California, Massachusetts,
Maine and Nevada voted in favor on November 8–US election night–which brings
recreational cannabis usage legal to eight states (Colorado, Washington, Oregon and
Alaska being the other four).
In that regard, prior to the presidential election, INN spoke with Brochstein about the
cannabis rally in the US to get an idea of how the election could impact the industry.
“I’ve been telling my subscribers that we’re going to have a very big rally at the end of
the year due to these elections,” he said. However, at the end of October, Brochstein

said he “called the end of the rally,” suggesting that it’s not sustainable and that “the
valuations are too high.”
Despite the positive turnout for voting in favor of legalizing marijuana, Brochstein was
surprised by what the outcome could mean for the industry.
“The Trump election and the uncertainty it brings regarding federal cannabis policy was
certainly not expected,” Brochstein said.
Earlier in November, Denver, Colorado, became the first US city to legalize ‘social’
marijuana use. What that means is consumers will be able to use it in places like bars,
restaurants and clubs, Reuters reported. Other states have allegedly authorized similar
ideas, but Denver is the first city to put them in place, the publication noted.
On that note, December 15 became the day were recreational marijuana laws came into
effect in Massachusetts. Now, consumers can possess and grow unlimited amounts of
cannabis in that particular state.
In a separate interview with INN, James Dines, who publishes The Dines Letter, agreed
that the US vote to legalize marijuana was a significant impact in 2016.
“I’ve been watching it for the last few years and the trend was inexorable and more and
more people were in favor of legalizing it,” he said.
However, a month following the election, Haaretz reported that Trump’s pick of Jeff
Sessions for attorney general has previously made comments that could be detrimental
to the legalization of cannabis under a Trump government.
According to the publication, Sessions said, “good people don’t smoke marijuana.” He
had also previously made comments that the Ku Klux Klan “were OK until I found out
they smoked pot.”
Naturally, those in the cannabis sector are concerned about what a Trump presidency
could mean for legalization. In another publication, Ethan Nadelmann, executive director
of the Drug Policy Alliance, said “Trump’s appointees so far are a nightmare.”
Although the legalization of marijuana could take a different turn once Trump becomes
president, another big headline in the cannabis industry in the US was the New York
Stock Exchange’s approval to list a marijuana company on its exchange for the first
time.
“Positively, a NYSE listing for a cannabis REIT is also something that was a surprise,”
Brochstein told us.

As Trump takes office in January, those in the cannabis sector will be watching carefully
to see what transpires in an industry that has evolved significantly over the last twelve
months.
2016 cannabis overview: Canadian task force on legalization
In Canada, 2016 was a huge milestone for the cannabis industry–particularly later in the
year.
On December 13, the Canadian government released its task force, detailing guidelines
on the legalization of marijuana. Some key highlights of the guidelines include:
consumers to be at least 18 years of age to buy; sales to be regulated at a provincial
and territorial level; the promotion and support of pre-clinical and clinical research on
cannabis use, and facilitating submissions of cannabis-based products for market
authorization; and a limit of four plants per household for the purposes of growing.
Brochstein weighed in again with INN, telling us that the task force report “was not full of
surprises.” He noted that it was a deliberative process, but said he fears “investors are
putting the cart in front of the horse.”
“It’s very obvious that Canada is going to legalize, but it’s not so clear what that’s going
to look like or what the time frame is going to be,” he added. “Any time we get updates
like this, I think a lot of people like to spin it positively.”
In that regard, Brochstein said the biggest surprise was the labelling requirements.
“It appears that they’re very concerned about making the products look appealing,” he
said.”It’s uncertain what the labelling limitations are going to mean to the industry.”
However–although the announcement came in 2016 for legalization in 2017–Brochstein
said to not expect sales of marijuana until 2018.
“Between now and then, there’s not a lot for investors to go on except for what’s going
on in the medical market, which remains pretty positive.”
While the task force report is unquestionably the biggest news to come out of the
industry, at least in Canada, there were a number of other significant stories as well. In
October, Shoppers Drug Mart officially applied to distribute medical cannabis. London
Drugs has expressed its interest in selling, although it has yet to formerly apply for its
distribution.
To that end, in October, it was announced that Snoop Dogg had partnered with Canopy
Growth (TSX:CGC) with a line of marijuana products for the domestic market. Of note,
Canopy Growth is the first the first pot company with a market capitalization above $1
billion.

Up and coming marijuana company, Aurora Cannabis (TSXV:ACB) joined the TSX
Venture Exchange in October. Cam Battley, vice president of Aurora told INN in an
interview that since the start of the year, the company’s market capitalization has
increased from about $50 million to $750 million.
As it can be seen, 2016 was a significant year for the cannabis industry–in the US and
in Canada–leaving plenty to look forward to in 2017 and beyond.

Cannabis Outlook 2017: Legalization on the
Horizon
The Cannabis industry soared in 2016 in the US and Canada.
Here's an outlook for what's in store for the market in 2017.
It goes without saying that the
cannabis industry reached a new high
point in 2016. The US voting in favor
of legalization (in four states) on
November 8, and the Canadian
government releasing its task
force for recreational use of
marijuana on December 13 were
certainly two of the year’s biggest
moments.
Looking ahead, there is indeed a lot to
look forward to in the cannabis sector that goes beyond 2017’s expectations. For
starters, the cannabis market was expected to jump over $6.7 billion in the US during
2016, and it’s only expected to increase from there. By 2020, cannabis sales in the US
are expected to grow to $21.8 billion.
The story is similar in Canada: according to the Globe and Mail, there are currently 26
marijuana stocks listed in Canada–which has helped the industry soar from almost
nothing a few years ago to $4 billion in 2016. What’s more, a report by Forbes.com
estimates that the cannabidiol market will grow to $2.1 billion by 2020.
As such, the Investing News Network (INN) had the chance to speak with Alan
Brochstein of 420 Investor to get an idea of how the cannabis industry is shaping up in
2017.
Cannabis outlook 2017: legalization in Canada
In Canada, anticipation of the federal government legalizing recreational use of
marijuana sometime in the spring of 2017 is no doubt at the forefront of what to look
forward to come the new year. As previously mentioned, the Canadian government
released its task force laying out the guidelines for its legalization.
When speaking with INN about the guidelines, Brochstein said “it’s very obvious”
Canada is set to legalize, but that it’s still a little unclear about it it looks like, or what the
time frame will actually be.

“Any time we get updates like this, I think a lot of people like to spin it positively,” he
said.
In an interview with the Globe and Mail, Ryan Modesto, managing partner at 5i
Research, advised that the recommendations could potentially not be approved.
“While I am sure the government will take them very seriously, it doesn’t necessarily
mean they have to listen to anything that’s there,” he told the publication.
Still–some Canadian cannabis companies have given their seal of approval regarding
the task force’s guidelines.
Bruce Linton, CEO of Canopy Growth (TSX:CGC), said in a press release that the
report is “good news” for Canadians, which provides a “strong policy framework for the
government to consider.”
However, Linton expressed concerns that the task force is recommending no separate
tax regime for medical and recreational sales.
“A path forward to insurance coverage must also remain a top priority for Canadian
policymakers. Cannabis access can only truly be achieved if barriers to affordability are
removed,” he said.
Terry Booth, CEO of Aurora Cannabis (TSXV:ACB) expressed similar sentiments
regarding the task force in a separate press release. Booth said the company is “very
pleased” by many of the recommendations made, which includes maintaining a
separate medical access framework for patients.
“We also support the report’s comment with regard to the need for federally supported
research into the use of cannabis and cannabinoids for medical purposes, with the
explicit aim of facilitating their market authorization as drugs,” he said in the release.
To that end, Cam Battley, executive vice president of Aurora, said in an interview with
INN that 2017 is going to be “another enormous year” for the cannabis industry. In
addition to his role as executive vice president with Aurora, Battley is a member of the
Board of Directors of Cannabis Canada.
“We are working closely with the government to ensure that the legalization of cannabis
is done in a careful, appropriate and sustainable manner that protects public health,
public safety and is good for consumers and also good from a business perspective,” he
said.
Cannabis outlook 2017: uncertainty in the US
Looking at what the market will look like in the US next year, there’s still doubt with
respect to what legalization will look like under a Donald Trump presidency.

James Dines, who publishes over at The Dines Letter, said in an interview with INN that
the ramifications of Trump’s victory “have not actually been felt.”
“Something big is going to happen,” he said. “I think there will be a big shakeup in the
American economy, and that of course impacts the world. I think Trump’s victory was a
seminal event and I think that is going to have ramifications to everybody.”
Brochstein, however, said that his “crystal ball” is cloudy due to the absence on the
federal policy towards enforcement of the Controlled Substance Act in the US that have
legalized cannabis.
“I am optimistic that the medical cannabis market will be just fine, but I am concerned
that the federal government could interfere with states with respect to adult use,” he
said.
And it’s easy to see why: Jeff Sessions, the attorney general appointed by Donald
Trump has made no secret about his opinions on marijuana. At a Senate hearing in
April, as reported by the Washington Post, Sessions said, ““We need grown-ups in
charge in Washington saying marijuana is not the kind of thing that ought to be
legalized, it ought to be minimized, that it is in fact a very real danger. You can see the
accidents, traffic deaths related to marijuana.”
According to Haaretz, Sessions has also made the comments that “good people don’t
smoke marijuana,” and that the Ku Klux Klan were “OK until I found out they smoked
pot.”
That being said, CNBC commented “battling the cannabis industry could be political
suicide, given the victories on election day.” The publication also notes that Pew
Research found that 57 percent of adults in the US are in favor of legalized marijuana.
On that note, republican states such as Florida, Ohio and Pennsylvania all approved
cannabis legalization in 2016. CNBC said it seems “unlikely” that Trump would spend
“substantial political capital battling the legalization trend.”
What this means, is that on a political and economic front, it’s suggested that Trump
won’t increase enforcement or back down on the government’s current policy. “Instead,
the status quo will likely persist, meaning the growth of the industry should continue,”
CNBC suggests.
Investor takeaway
In terms of legalization of marijuana in Canada, Brochstein said while it is anticipated for
2017, he suggested sales of marijuana shouldn’t be expected until 2018.
“Between now and then, there’s not a lot for investors to go on except for what’s going
on in the medical market, which remains pretty positive,” he noted.

In the US, however, he said what will likely set the tone for the market will be the federal
policy on CSA enforcement.
“Unless there is some sort of draconian response, I think that the huge momentum from
the new States coming on line will lead to bullish sentiment for the industry and perhaps
the public stocks,” he said.
No matter which way you look at it, there are exciting times ahead of the cannabis
industry–in Canada and the US–and investors will be sure to keep their eyes open on
the growing industry in the coming year.

Cannabis Outlook 2017: Companies On a
High
With legalization of marijuana in play, 2017 is poised to be a
blooming year for the cannabis industry. Here's what some
companies had to say.
2016 has no doubt been a blossoming
year for the cannabis industry, and 2017
is without a doubt going to be another
prosperous year for the market.
For instance, the cannabis industry in the
US was expected to inch towards $6.7
billion in the US in 2016, and growing to
$21.8 billion by 2020. In Canada, the market
was estimated to be valued at $4 billion in
2016–with 26 marijuana stocks listed–a vast
increase from where it was not too long ago.
With that in mind, the Investing News Network (INN) had the chance to speak with a
number of companies in the space to learn more about what impacted the market in
2016 and to give their cannabis outlook for 2017.
Below, Cam Battley, vice president of Aurora Cannabis (TSXV:ACB) and Sebastian de
Kloet, corporate development at Beleave (CNSX:BE) share their thoughts on what
impacted the commodity in 2016, and what they’re looking forward to in 2017.
Cannabis overview 2016: regulations and significant change
Looking back, de Kloet said the federal government–under the newly-elected prime
minister, Justin Trudeau–moving towards legalization was on par with what he
expected, in particular with the task force regulations coming into play.
“With input from experts in public health, substance abuse, and law enforcement was
tasked with designing a new system of strict marijuana sales and distribution,” he said.
In terms of what impacted the cannabis sector in 2016, de Kloet commented that “2016
saw the emergence of numerous storefronts selling marijuana,” adding that they
detracted from the legitimate sale of of product from licensed producers. To that
end, de Kloet said the amendment of the Marijuana for Medical Purposes

Regulations (MMPR)–which subsequently became the ACMPR–provided a solution that
allowed registered patients to produce a small quantity of marijuana for themselves.
“These new regulations tremendously impact the industry by providing a regulated
source of starting material for patients that require better access, as well as establishing
an infrastructure where these patients can now obtain regulated and quality-assurance-
tested starting material from licensed producers,” he said.
On that note, Battley said for Aurora Cannabis, “it’s been a transformative year.” Early in
the year, the company had a market capitalization of $50 million, and has since grown
to $750 million. Battley also said Aurora migrated from the CSE to the TSXV.
Aurora first started selling cannabis in January, he said, adding that they now have over
10,000 patients in their financials.
“It’s been a year of transformative change,” he emphasised. “We have evolved into a
leadership position in the sector where we now have the second-highest market
capitalization of any cannabis company.”
Cannabis outlook 2017: legalization in play
Moving into 2017, as mentioned it’s poised to be an eventful year for the marijuana
sector.
de Kloet expressed similar sentiments, noting that Beleave is of the opinion it will be a
“strong market” going into 2017, with new regulations coming into play, with the
government working towards regulating the cannabis market.
“The LPs and those hopefuls that are soon to be licensed producers of cannabis under
ACMPR stand to grab a major share of the exponentially growing market,” he said.
Battley also said that 2017 is “going to be another enormous year,” for the cannabis
sector as the federal government moves to legalize it.
“That’s something we take very seriously and want to ensure it’s done right,” he noted.
What’s more, Battley said he is a member of the Board of Directors of Cannabis
Canada, who he says are working closely with the federal government to ensure the
legalization of cannabis “is done in a careful, appropriate and sustainable manner that
protects public health, public safety and is good for consumers, and also good from a
business perspective.”
“We’re looking forward with great anticipation to 2017, and it should be a significant year
in the history of the development of the cannabis sector,” he said.

Interestingly, Battley said the world will be watching carefully as Canada becomes the
first developed country in the world to legalize cannabis for consumer use, noting that a
new industry is being developed in real time.
“We are the pioneers in this space in the world, so it’s even more important that we get
it right, and we get it right the first time,” he said.
With legalization coming into play in the spring, investors will surely be watching how
the industry unfolds in the early months of the year, and beyond.

Task Force on Cannabis Legalization:
Investors Be Aware
On Tuesday, the Canadian government released its task force
regarding the legalization of recreational marijuana, which sent
pot stocks flying.
The Canadian government released its
task force on the legalization of marijuana
on Tuesday (December 13), and
consumers aren’t the only ones riding a
high from the announcement.
Ann McLellan, a former federal Liberal
cabinet minster and head of the report, told
the Business News Network (BNN) that the
report, “presents measures to create a viable
legal market, which will be essential to meet
the government’s objective of displacing the entrenched illicit market that exists in
Canada today.”
To that end, a few highlights of the 106 page report–which had more than 80
recommendations–include:
• consumers should be at least 18 years of age to purchase;
• sales should be regulated at a provincial and territorial level;
• public possession to be limited at 30 grams of dried non-medical cannabis or an
equivalent;
• that there should be a limit of four plants per residence for growing.
In that regard, Alan Brochstein, analyst at 420 Investor, told the Investing News Network
(INN) in an interview that the task force report “was not full of surprises.” He said it was
a deliberative process, but notes he fears “investors are putting the cart in front of the
horse.”
“It’s very obvious that Canada is going to legalize, but it’s not so clear what that’s going
to look like or what the time frame is going to be,” he added.
What’s more, Brochstein said that whenever there’s updates on legalization of
cannabis–including the task force announcement–it gets “spun in a positive way.” He

also commented that the release of the report didn’t throw any curveballs. Importantly,
he said we shouldn’t expect first legalized marijuana sales until mid-2018.
“Between now and 2018, there’s not a lot for investors to go on, except what’s going on
in the medical market, which remains pretty positive,” he added.”There’s a huge amount
of embedded capital gains in the sector.”
On that note, Brochstein said it’s very positive that the government shows concern with
respect to harm reduction, safety, and access to minors in the black market. “All these
things bode very well for the supply, cultivation, and processing being done by the
existing LPs.”
Still–it’s big step forward in an already blooming and thriving industry, and companies
are feeling the excitement.
In a statement, Bruce Linton, CEO of Canopy Growth (TSX:CGC), said the report is
‘good news’ for Canadians and provides a strong policy framework.
“We think it confirms that the current medical system for production is working and
should form the backbone of ongoing production into the future,” he said. “It recognizes
the value of limited grow-at-home and diversity of producers and access methods.”
Following the task force announcement, shares of the company rose 7.9 percent to
close at $10.79 on Tuesday.
In a separate announcement, Aurora Cannabis (TSXV:ACB) also gave its nod approval
over the task force report. Terry Booth, the company’s CEO, said the company is “very
pleased” by many of the recommendations made, which includes maintaining a
separate medical access framework for patients.
“We also support the report’s comment with regard to the need for federally supported
research into the use of cannabis and cannabinoids for medical purposes, with the
explicit aim of facilitating their market authorization as drugs,” he said in the release.
Shares of Aurora Cannabis saw an increase of 6.09 percent for the one-day period,
closing the day at $2.44 each.
Other cannabis stocks that also saw an increase include: Mettrum Health (TSXV:MT)
(who signed an agreement last month to be bought by Canopy), whose shares
increased 7.67 percent to $7.16; shares of Aphria (TSXV:APH), rose 5.33 percent to
$5.34; and, OrganiGram Holdings (TSXV:OGI), whose shares spiked 4.95 percent to
close the day at $3.39.

James Dines: Gold and Cannabis Blooming
James Dines recently spoke with the Investing News Network
about how gold and cannabis fared in 2016, and what's in store for
2017.
Gold and cannabis fall on completely
different ends of the spectrum, but both
sectors have blossomed in 2016.
James Dines, who has long been known for
making contrasting predictions from what
others say in a number of markets, recently
spoke with the Investing News Network’s Nick
Smith, about how the gold and cannabis
sectors looked in 2016, and what to look for in
2017.
In particular, Dines shed light on what he feels the biggest news of 2016 was, what he
looks for in a cannabis stock, and what is exciting about 2017.
James Dines publishes over at The Dines Letter, which offers advice and information for
traders and investors. According to its website, “The Dines Letter encompasses a vast
variety of material based on years of observation and study, encompassing and
including these four main areas that combined are called DIQUIN (The Dines Quintet
Method of Investing).” He can also be reached at 1-800-84-LUCKY (1-800-845-8259).
Below is a transcript of the interview. It has been edited for clarity and brevity. Read on
to see what Dines had to say.
INN: As we come to the end of 2016 when you look back what did you think was
going to happen this year in the resource sector?
JD: We flashed a buy signal, a very lucky one, in February of 2009 just within four days
of the low. Then we rode the uptrend all the way up until the end of 2014. At that point
we flashed a sell signal because major trend lines were broken; since then the averages
have been flat. This is possibly a top formation. It’s a neutral formation, so I was bearish
or negative and adamant in the market in January of last year and that worked very well
with two exceptions. Number one: we turned on bullish on gold in February and also on
marijuana stocks.
They’ve had phenomenal years. We’ve had great a year this year even though I’m
bearish on the market.

INN: What was the biggest news this year that you feel when you look at the
resource or the marijuana sector?
JD: Well for marijuana I recommended them because I knew they’d be on the election
in California which is the biggest state. I’ve been watching it for the last few years and
the trend was inexorable and more and more people were in favor of legalizing it. There
was such a negativity to it that I thought it would be a good opportunity. A lot of these
stocks were so depressed, beaten down and ignored, that they were literally selling for
pennies and we got into some of those very low priced stocks. One of them is up 1,600
percent percent in the last seven months.
The other news was of course gold. We turned bullish on that early in the year. Gold
and silver have had phenomenal rises. The golds and silvers have moved down now,
and what I’m waiting for is a bottom. That should happen by early 2017, and should
carry gold and silver much higher. We will need to get a little closer to the year before I
can reaffirm that prediction.
INN: When people look at a resource stock there are certain methods to evaluate
whether that could be good purchase, land package, management finance. What
do you look at in a cannabis stock? What are the fundamentals that you look at?
JD: The way you find the stocks is first of all trying to get the names that are out there,
the ones that are on stand and go through those and look for size or growth of income.
In this case most of these companies are one, two, three years old so there’s not a lot of
past history to use.
So if you get in really rock bottom of new bull markets, that’s the way to make serious
money. So with marijuana, I tried to find out which ones were listed and in exchange
and there were almost none. But, there was one called Canopy Growth (TSX:CGC),
and I knew that when the excitement of the election in California happen that would
mean that one in six of Americans were in favor of legalizing marijuana, which was a
huge change, and that they would be looking for stocks to buy and the rest of the
security analysts were completely asleep.
INN: So cannabis and gold were things you were looking at for 2016. As we look
now for 2017 what is exciting you about the future?
which I think is fair to say was a political earthquake in this country. I think the
ramifications have not actually been felt.
Something big is going to happen. I think that gold, which is the ultimate repository, is
going to one area. Bitcoins are also in uptrend which is also suggestive of some kind of
trouble in the currencies market. Silver has got to be one of the most underpriced
metals in the world. There are other areas that I’m watching, but to me we are at a very
important threshold. Either this thing is going to breakdown entirely with under a debt
currency crisis or Trump will somehow pull some magic tricks again.

He is the only politician that has mentioned the Feds and doing something about that.
He’s hostile to the Fed which he should be. They’re the ones who are responsible for
seven years of zero interest rates to stimulate the economy and it’s not stimulated.
I think there will be a big shakeup in the American economy, and that of course impacts
the world. I think Trump’s victory was a seminal event and I think that is going to have
ramifications to everybody.
In terms of stocks to buy, I would be very cautious.
The one thing I’m sure of though is that gold and silver will come out ahead somehow
because it is the ultimate currency. Bitcoin has got a chance and possibly other old
currencies might come in.
In terms of stocks, the two I favor are Agnico Eagle Mines (TSX:AEM), which is great
management, and they’re gold and silver and also Pan American Silver (TSX:PAA) is
very high quality. They’ve got a nice property in Argentina. Argentina has just gotten a
pro-capitalist government so I think that stock is not yet fully expressed as a potential
but that’s more for conservative people who want to just hold this things for a while.
INN: Okay. Thank you so much.

US Pot Stock Rally and Blair Report:
Cannabis Analyst Weighs In
The Investing News Network recently had the change to speak
with Alan Brochstein about the rapidly growing cannabis market.
With the cannabis market growing and
excitement over its potential legalization,
cannabis stocks have been reaping the
benefits lately.
As the market blooms, the Investing News
Network (INN) recently caught up with
cannabis stock analyst Alan Brochstein for his
thoughts on the Bill Blair report to prime
minister Justin Trudeau expected this month,
sector catalysts and the recent stock rally in
the US Marijuana stocks.
Alan Brochstein’s 420 Investor is the go-to
community for investors to learn, explore, and
profit from the marijuana companies. The
main goal of 420 Investor is to provide real-
time, objective information about the top marijuana companies in the market in order to
help investors capitalize on cannabis.
In particular, highlights of the conversation included:
• The Bill Blair Task Force Report
• The US cannabis stocks rally
• Cannabis sector Catalysts, including Sanjay Gupta’s infamous reversal and the
Coleman Memorandum in Oregon and Washington.
• Recent mergers and acquisitions in the cannabis sector
• How the marijuana sector is attracting technology entrepreneurs from Silicon
Valley
Below is a transcript of our conversation. It has been edited for clarity and brevity. Read
on to see what Brochstein had to say.

INN: For readers that might not be familiar with your work, can you give us some
background on yourself and new cannabis ventures?
AB: I’ve been in the cannabis industry since 2013, fulltime since early 2014.
Right after college, I went to work on Wall Street in the bond market and later in my
career moved into investment management and shifted into equities. At the end of
2006, I started my own firm as an independent equity analyst providing research and
consulting services to money managers. I was also was a blogger on Seeking Alpha
and ran a few model portfolio services. That put me in a position in early 2013 when I
first realised I was one of the first people to research cannabis stocks from an analytical
perspective.
INN: What prompted you to start covering the cannabis sector? Can you give us
some insight into new cannabis ventures?
AB: In early 2013 right after the 2012 elections,(cannabis was) legalized in Colorado
and Washington. All of a sudden there were about eight to ten cannabis stocks–or
purported cannabis stocks–that doubled in value.
I was a writer on Seeking Alpha and somebody published an article about one of these
companies.
This article really spoke to me because on one hand, it pointed to the promise of
legalization, but highlighted that there were scam companies out there..
As that year progressed, Sanjay Gupta issued his famous reversal. He was the Chief
Medical Officer for CNN. He had been a pretty adamant opponent to medical cannabis
and said it was a fraud. He then released the documentary Weeds and issued a Mea
Culpa. He said he was wrong and that was one of the things I was looking for in terms
of a major media figure embracing cannabis legalization for medicinal purposes.
In August, the federal government allowed Colorado and Washington to move forward
by issuing the Coleman Memorandum. This was huge because everybody wanted to
move forward, so the government gave Colorado and Washington the green light.
So, I launched 420 Investor in September 2013 to focus on the cannabis sector, the
publicly traded stocks, and more recently New Cannabis Ventures.
INN: The cannabis sector’s heating up on both sides of the border with the US
election arand the Bill Blair report to the Prime minister expected out this month.
The report will follow the lead with states like Washington and Oregon which has
successfully implemented recreational use of cannabis. Do you see something
completely different in Canada?

AB: Yes. Canada’s a huge focus of mine. About a year ago in mid-October, right
before the elections, I hosted a panel in Denver that had some of the leading CEOs
from the sector there and it was like an empty room. . Part of Trudeau’s platform is to
legalize cannabis. It’s been really interesting to see this play out.
I don’t think people widely appreciate that this Task Force Report will not be publically
disseminated at first, so that’s the first thing. That’s something people should be aware
of; there’s a timeline and the only things on it right now are the Task Force and
introduction of the legislation which has been pinpointed to be in the spring of 2017.
Then there’s a timeline beyond that what the legalization will look like.
I think what’s going to be complex about this is – and I don’t have any answers – is
what’s the distribution going to look like? Right now every single gram of cannabis is
sold legally in the ACMPR system, which is through mail order and. ‘Will it even be an
option?’ is the question for legal. I think it will.
I think that what the ultimate legislation will show is that it’s not going to be a “one size
fits all”approach. Each province will have control over the distribution, so it’s going to be
different in the east and the west. ill we have dispensaries like in Colorado and
Washington? Will it be only the producers that are allowed to have physical stores? Will
it be the LCBOs type model? Will it be the drug store type model? I really don’t know
how it’s going to play out.
INN: Can you give our readers some insight into the big rally of late in the US
cannabis stocks? Do you see it’s sustainable?
AB: Yes. This has been amazing. Some would say there were rallies before but there
just weren’t enough stocks. That first rally was in February of 2013 where the stocks
basically doubled and then they lost two thirds of their value, until the summer of 2013.
The second rally is what I’d like to call The Mother of all Rallies. In that rally, I have an
index that bottomed out at 70 in the summer of 2013 and I think it was at about 150.
In the next two and a half months, that index went from about 150 to over 1000. The
reason for that was people were waking up to what I had learned in early 2013 because
it was on national media, international media.
In that rally there weren’t that many companies that people could buy and there were a
lot of people that wanted to buy simple.. You had stocks go up way more than they
should have and it was not fundamentally driven. The valuations were insane.
Now fast forward to this year. I’ve been telling my subscribers that we’re going to have a
very big rally at the end of the year due to these elections. I published on August 31 a
report not only saying what I expected to happen and when, but which stocks should be
bought as well. I warned people that it’s not sustainable. It’s a trade.

On October 31st I called the end of the rally. To answer your question about
sustainability, unfortunately it’s not sustainable. The valuations are too high.
INN: Canopy Growth (TSX:CGC) made headlines with the acquisition of Verdi
Medical and Groupe Hemp. Can you give us some insights into this acquisition?
AB: Canopy Growth is the largest in terms of market cap and sales of a publically
traded license producer in Canada. They have two brands that they operate
under: Tweed which consumers will be familiar with and Bedrocan which uses the
license to produce a medicinal minded product.Vert Medicalin Quebec is a really
different animal from the rest of Canada.I think it was smart that they established a toe-
hold there in Quebec. They bought what’s now Tweed Farms, a large greenhouse..
They were able to use their clout with Health Canada to get that license pushed through
pretty quickly.
Mettrum Health (TSXV:MT) did the same thing with another pre-licensed LP. I think we
should expect to see more consolidation. Canopy Growth is the biggest company will
probably continue to be a consolidator.
INN: Do you think we’re going to see more mergers and acquisitions to cannabis
sector?
AB: There actually are some decent companies listed on the OTC. I think one thing that
you can do with your high valued stock is use it to make acquisitions. We’ve seen a
couple examples of that and I do expect to see a little bit of that. It’d be really nice to
see a real company, like one that shines in the private sector, merge with one of these
publically traded companies. I don’t know if we’ll see that.
In Canada, I think it’s going to be really hard for a lot of these LPs,depending on how
the rules play out if we move to a system where there are a lot of storefronts, it’s a little
different. You don’t have to establish your own brand but then you have to grow at a
very low cost. It’s going to be really tough for some of these pre-license companies that
plan on having their own brands and all that, it’s going to be really tough. If they want to
succeed. I think they’re going to have to be part of a larger company.
Right now, there is one more that about to go public, so there’ll be about 10 companies
that are publically trading. There’s 36 licenses, but some of those are multiple licenses
that are held by some public companies. There’s probably another 20 companies that I
think don’t have good access to capital. The LPs definitely have good access to capital
so that suggests consolidation as well.
INN: You recently published an article rg on how the sector’s attracting
technology entrepreneurs from Silicon Valley. Is there anyone in particular you’re
following or think investors should watch out for?

AB: Yes. The article you referenced, done by Melia Robinson on Business Insider
picked out some great companies,
I would point to even among that list, there’s just some bigger themes. Everybody
always likes to think about “Who are the big players in cannabis? They must be the
people selling it or growing it.” That’s really not the case. There are some. It’s really
hard to make money in that business because of punitive taxation, not only is there the
state and local taxes that we’re all familiar with, but w something called 280E . It’s a
more than 30-year-old rule for the Miami drug lords, the cocaine industry. They wanted
to collect taxes on these people that were engaging in illegal activities.
They use this antiquated law today to push marginal tax rates 75 to 80 percent. I think
where companies are able to attract more capital is where I would point people they
need to be looking at.
Big picture I would suggest focusing on some of these ancillary companies that are
outside the growing and selling part of the industry.

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