Greg answers member questions about billionaire investors, a cannabis tourist destination, and the right number of marijuana investments in your portfolio. See what he had to say…
Welcome to another edition of our member Q&A.
We had another exciting week here at the Institute, as Cannabis IPO Insider members saw a bonus trade recommendation and we welcomed Cannabis Options Expert Tom Gentile to the NICI family. If you didn’t get a chance to see his first story yesterday, you can read it here.
Cannabis Investor’s Report members can also view our Boardroom Meeting with Tom here.
We also got some great questions and comments this week, so let’s dive right into those.
Patricia W. wrote in to say: “Greg, I bought the elite membership about a month ago. I have been following your instructions and have bought 12 different stocks. I worry that I am spreading myself too thin. Should I just narrow my stocks down and just invest in a few good ones?”
Thanks for the question, Patricia. Twelve is a lot of stocks to have in any one area, but I can’t tell you whether it’s too many for you. As I’ve said before, each person has different circumstances. I can share some general thoughts, though. I’ve been getting emails from many Elite members who have made a lot of money using the NICILytics database. Some have pursued your strategy of purchasing a lot of stocks, while others have picked a favorite few based on our ratings and the analysis on the companies they like. So there’s no sure answer.
For Cannabis Investor’s Report, I think that somewhere around 12-14 stocks is the most we’re likely to have in the model portfolio at any one time. I do think it makes sense to own more stocks with a smaller investment in each than fewer stocks with a larger investment in each because the companies are increasingly starting to merge with each other. Having more stocks increases the odds of being on the right side of one of those mergers.
But I’m also mindful that we’ve got a lot of new investors who cannot afford a big position in too many stocks in a single sector, even one as attractive as cannabis. That’s why I like to also bring to the attention of all of our members trades like this.
In the Cannabis Investor’s Report portfolio, we’ve got some companies which are likely to be buyers, others which are likely to be sellers, and some which will likely go it alone at least for now. But as I’ve said, how you use my recommendations is ultimately up to the person who understands your situation best: you.
Jacques B. commented: “I would like to see Warren Buffett put down a considerable amount of money on the cannabis movement. He can change the current state of affairs… Let 4/20 be a moment of history with a considerable trillion dollar contribution.”
I’ve written a lot about billionaires investing in the cannabis business, but I do not think that Warren Buffet will be among them – at least not yet.
It would make sense if he did. He made his biggest profits by investing in big brands like Coke, American Express, and ABC Networks and in highly regulated businesses like railroads and banks. Cannabis will be both of those things at the same time! But all of Mr. Buffet’s investments that we know of are done through the company he runs, Berkshire Hathaway. And Berkshire is primarily an insurance company. A business like that will not invest in cannabis until it is fully legal on the federal level.
Berkshire Hathaway may make an investment indirectly, though. Coke is still one of Berkshire Hathaway’s largest holdings, and it is known to be following the CBD market carefully.
And as I mentioned, other big money players who are less constrained by their companies’ regulations are jumping into the cannabis market.
Richie M. wants to know: “When do you think American Green (OTC: ERBB) will open up the town it bought and create a Mecca for pot users?”
I have to say, Richie, that I haven’t given it a lot of thought. There are a lot of great investment ideas in the cannabis space, but I can’t say that American Green is one of them.
Cannabis is set to be a huge disruptor to multiple industries, but a special town for it is not one of them, in my opinion. In fact, American Green is exactly the kind of penny stock that I warn investors to stay away from! It started in 1998, and since then it has claimed to be in the live media business, copy protection, some other kind of media technology that I can’t identify, and, since 2012, cannabis. For all of that, in the latest quarter it reported revenues of under $300,000. It survives by borrowing money and converting the debt to shares of the company, which the lenders then sell. And the company has – are you ready for this? – 28 BILLION shares outstanding. That’s 85 times as many shares as Alphabet, the parent of Google.
At any rate, American Green paid $5 million for an abandoned mining town in the California desert, hoping to convert it to some kind of cannabis destination. There’s no reason to think it might succeed, and even if it does there are all of those shares to spread the profits across.
If you want to go to a cannabis tourist destination, I recommend Las Vegas. Just about every major U.S. cannabis firm has or will have a presence there.
And if you want to invest in cannabis, stick with the companies that are focused on the $50 billion opportunity and are more careful with their shares.
As always, if you have any questions, thoughts, or concerns, drop us a note in the comments! We love hearing from our members, and we want all of you to stay actively engaged in this amazing community.
Executive Director, National Institute for Cannabis Investors
8 responses to “Q&A: Are You In Too Many Positions?”
April 13 2019