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Don't Have A Million, But Want to Invest in Cannabis?

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Don't Have A Million, But Want to Invest in Cannabis?

Don't Have A Million, But Want to Invest in Cannabis?

Here's my take on it.

From an excerpt with Green Entrepreneur (full article here).

Get our detailed investor check list click here.

Let’s get to the million dollar question, which is: I don’t have a million dollars, but I want to invest in this business. Where do I start?

First my advice is always that you should go to the experts, that's why I came to Cresco Capital Partners. I wanted to invest along private equity and venture capital experts so I could learn from their 10,000 hours instead of having to do my own.

Say you've already done that. Then you need to get your seat at the deal-making table. Then you start to get deals and access into the space that outstrips your network. One of the first secrets is, wealth is made on the private side. If you look at anybody who has accumulated wealth – not just rich, but real wealth – it’s because they’ve done investing either on real estate or in their own company on the private side. That’s just the “why” of this even mattering.

Explain that a little bit to me. On the private side, meaning they’re not public companies that they invest in?

It’s very hard to make generational wealth or real wealth by investing in public stock markets. Outpace inflation, definitely, but replace your income? That's tough. You can see that very quickly. Say you put all the faces from the Forbes 100 list of billionaires on one page. What you would notice if you went through all their bios? Not a single one of them made their money from smartly investing in public stocks.

The brilliant Warren Buffett, Carl Icahn, they only move when they have three things...

The best investors like Warren Buffett, Carl Icahn, etc they only move when they have three things:

  1. The first one is an unfair advantage. For instance, Carl is an activist . He can go bother the founders of the company until they make changes to the actual company and make him money. So you need an unfair advantage in some way.

  2. The second thing that you need is intimate knowledge. Not insider knowledge. You can’t have anything illegal. But you need intimate knowledge of the industry, the company, whatever you’re investing in. You really can’t get that with public stocks because otherwise it would be insider information and you have to be incredibly careful to be ethical and law abiding. On the private side you can have financials, access to the actual founders, access to their actual distributors and request a financial colonoscopy for all intents and purposed. Essentially what you need is information beyond what the news and Jim Cramer could scream at you on CNBC. You need that.

  3. Then the third thing is the ability to affect the outcome. That’s how we invest on the private side because by giving them capital, we can talk to them about how they’re going to exit, who’s going to buy them, help them structure the exit on the backend, and the list goes on. When I invest I want to be more than money, I want to be a fulcrum they can place a lever on to lift more than their bodyweight.

Those three items are really key to investing. But we’re talking at a super high level. We’re not all going to have that on Day 1, but you should always have that in the back of your mind. That is the goal. It’s why I’m really worried about anybody who’s a price speculator.

What does price speculator that mean? Why does that worry you?

The crypto crisis, the housing crisis, the internet bubble, and then if we go way back to tulip mania, (which was where people were paying hundreds of dollars for a tulip bulb), it’s all the same thing. It’s all called price speculation, which basically means people invest in something just because they think the next guy is going to buy at a higher price and they’ll be able to sell after he gets in. But they don’t believe that there’s real value in what they’re investing in.

We’ve got to be careful about that. There’s a little bit of that in cannabis, so on the public side I’m really cautious about investing.

It seems out of whack right now on the public side of cannabis with the valuations of the underlying companies. 

You may be right, I don’t have a crystal ball. If I did, we’d be on my yacht while recording this podcast. But what is important on the public side, or any time valuations or the price of stocks is concerned, is to always be looking at the downside.

Does it make sense for the top 10 cannabis stocks to be worth 4x more than the top 10 biotech, tobacco, pharma, or healthcare stocks, from a price-to-sales perspective? Which just means the price that they’re worth versus how much they actually sell.

Does it make sense for the top 10 cannabis stocks to be worth 4x more than the top 10 biotech, tobacco, pharma, or healthcare stocks, from a price-to-sales perspective?

I don’t know. It’s a growth industry; it could be, but my instincts say probably not. The key to investing is always buy low, sell high, and train your brain on that. Focus on price first before excitement. That is how we avoid price speculating.

Say you want to get smart on cannabis investing in 30 days how do you do it?

Step One: Get Smart

You should be, in my opinion, not doing anything except getting smart. Listen to all the podcasts on Green Entrepreneur, and then go over to CannaInsider podcast, and then go and look at some of the investor intelligence reports like Cohen. Don’t spend a lifetime; do this in a weekend. You can binge-listen to a couple podcasts, binge-read all the investor intelligence on MJBiz or Green Entrepreneur or Cohen and in that span of time you will be more knowledgable than 90% of the populace on your subject matter.

Step Two: Get In The Game

If you want to invest, or if you want to do anything – you need to go where the game is played. Say you want to play baseball. The first thing that you should probably go do is watch a baseball game. Then you go try to play a baseball game amongst you and your friends. Then you try to figure out who are the reporters that cover baseball. Then you should probably try to go to three or four conferences of people who are talking about baseball, playing it, or selling baseball gear.

If you want to invest, or if you want to do anything – you need to go where the game is played.

It’s not dissimilar to investing. You go where the game is played. In cannabis, in my opinion, that would be places like ArcView, which is kind of like AngelList. AngelList is where you can go and invest in lots of different startups, but at very low dollar amounts in a quasi-crowd equity investing model. ArcView is similar but for cannabis, and they also have research and conferences to support. So you go to a couple ArcView conferences, and you join that insider circle.

Step Three: Meet the Players

Then you start reaching out to the insiders. Prior to an Arcview event you email all the speakers that are relevant. You setup a goal of 3-5 one on one meetings. You prepare with notes and background on the individuals and you try to stay in touch feeding them deals and ideas. These three steps are more than 99.9% of humans will take the time and effort to do. It is amazing how much success lies just over the other side of trying.

What is truly crazy is, after you do those three things – listen to a ton of podcasts, read as much as you can about the industry, and then get hooked up to an industry group and go to one of their conferences – you are smarter than 90% of the population on cannabis.

What’s the conversation you have with these people that you connect with in cannabis as a newcomer? Is that the moment when you present yourself, about who you are and what you have to offer?

First, if you go where the game is played because you want to be in the game, you will have opportunities presented to you that you never otherwise would.

First, if you go where the game is played because you want to be in the game, you will have opportunities presented to you that you never otherwise would.

That’s my promise to you. If you do these three things and you go to where the game is played with a curious mind and dig in, you’re going to have opportunities arise that you couldn't have planned yourself.

If you have that belief, then when you go, here are two things that are super important.

One is curiosity.

We’re all egoists, right? I like to have my ego stroked. But the truth is, if somebody comes up to me and says;

“Codie, I’ve been reading your stuff, listening to your podcast here, I saw you speak here, and I’m really curious as to what you meant in this sentence”

or “I’m really curious, what do you think about this?”

or “how would you enter this space?”

or “why did you do this particular move?”

– those small, tailored questions to somebody’s ego, showing that you’re truly curious, not wasting there time. It speaks volumes. If you do that to five or ten people, the likelihood is you have two to three to four who want to engage with you. So that’s where I’d start. Curiosity.

Second item is give before you take.

I just interviewed an analyst today for our firm. The way he came to me was similar to what we've just been speaking about. He reached out, said he had listened to a few of our thought pieces. But he did something different than saying, "Hire me."

He said, “I’ve been doing research and analysis on the space in grad school right now and did some models on vertically integrated companies...” -- which are companies like Acreage.

"... I did some research on a few of your portfolio companies and their competitors. Would that be useful to you?”

Of course that is interesting.

I looked at it. The models were actually really good, so I followed up with him and gave him a bit more work. Right now I’m looking at the lab testing space. Every time somebody wants to sell you cannabis, they’ve got to go take it to a third-party lab to see if it has any pesticides in it or if it is THC at the level that they say it is. I’m interested in that key portion of the industry. So I said, “Why don’t you try to apply your thought process to this lab space?” He did it, did a great job, and I’ll probably offer him a job.

So that second key is not what they can do for you, but what you can do for them. If you provide value to people who are in positions of power, that is so rare – so rare – that they are going to want you in their circle.

The moral of the story is this...

..investing is not only for the high and mighty.

New industries have opportunities that pervade them if you are curious, driven and give before you take.

Be one of the few who do, and you just may find another wealth driver for you.

Get our detailed investor check list click here.

Or read full Green Entrepreneur article here.

Codie A. Sanchez

Managing Director - Partner at Cresco CapitalPartners, LLC

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Showdown: Cannabis vs Alcohol

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Showdown: Cannabis vs Alcohol

Who will win? Cannabis vs Alcohol

This is the question haunting those at the top of Alcoholic Beverage companies around the world, and making investors increasingly interested in the new green crop.

As the total size of the market increases in Cannabis we can see why, our consumer base is growing while one could argue the alcohol industry's is shrinking.  

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The interesting trend is not simply the total growth but also where that growth comes from. 

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What do these images tell us? That as users of cannabis increases, alcohol consumption decreases. 

In fact (~60%) of monthly cannabis users surveyed all said cannabis has reduced their alcohol consumption, regardless of alcohol preference. While New Frontier Data found that nearly half (45%) of cannabis consumers who also drank expected to eventually replace at least some of their alcohol use with cannabis. For those who enjoyed the taste and traditions yet worried about the health effects of alcohol, a new profusion of non-alcoholic, cannabis-infused beer and wines are (where legally available) offering some intriguing potential replacements. Now this is interesting in and of itself as a tailwind that is going to fuel cannabis companies growth however as it becomes easier to access cannabis we see something interesting happening.

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More users who had previously used cannabis before are now re-engaging. So we have two trends, first is that current cannabis users consume less alcohol (that affect seems to continue) and secondly as more cannabis users come online this trend may accelerate. 

What does this mean for us as cannabis investors?

  1. Large acquisitions of cannabis companies by Alcohol companies as we've already seen with Constellation brands amongst others.

  2. Alcohol companies creating their own cannabis and CBD beverages as Molson Coors is here.

  3. Increase in market share from Alcohol to Cannabis, which simply means more sales and thus more profits to us, theoretically.

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That may be why 2018 looks to have been the worst year for beer sales in nearly a decade. 

As we look ahead with more medical and adult use cannabis markets coming online, cannabis is looking up and alcohol, well, alcohol needs to get creative to compete.

Ahead: Look for more acquisitions in alcohol and cannabis, more partnerships and more sales swaying away from wheat and into another plant. 

TOTD: “I will tell you how to become rich. Close the doors. Be fearful when others are greedy. Be greedy when others are fearful.
— Warren Buffett

This quote really sticks with me, it's what I remind myself when so many are concerned about this space. When there is no more concern about cannabis, when greed runs rampant, that is when we must be cautious.

I believe whole heartedly in what we are doing as a generational wealth creation event if we do this right.

That's why some of our biggest investors at CCP are former alcohol, CPG and beverage execs. Not all companies will be winners, far from it, but those who do this strategically just may be. 

Codie Sanchez

Cresco Capital Partners

Disclaimer: This report reflects the current opinion of the authors, aka me. It is based upon sources and data believed to be accurate and reliable. Opinions and forward looking statements expressed are subject to change without notice. This information does not constitute a solicitation or an offer to buy or sell any security. The fund is open only to accredited and qualified investors. And in investing you should always question everything.

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Secrets to Financial Freedom: How to Speak Green

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Secrets to Financial Freedom: How to Speak Green

Show Me The Money!

That’s what we hard working grinders want, isn’t it?

We don’t grind for countless hours, forego any semblance of a social life, and dedicate ourselves to our business simply for sainthood. Do we?

We do it because we want to build something in this world, to create a better life for ourselves and our families, and to reap the rewards of our sangre, sweat and tears. 

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And yet… I have to tell you, if you are a minority, a woman, a Latina like me, it ain’t easy, is it?

It’s like we’re in a race for our lives, but we began behind the starting line. Why? Because we weren’t taught as Latinos about finances, about investing, about cash flow, about IRR, or ROI or lines of credit. All we knew was:

  1. Don’t spend what you don’t have. 

  2. Keep some under the mattress for a rainy day (sometimes literally, eek). 

  3. And… “Niñita porque tu compras algo sin cupones??” Got it Nana, always use coupons. 

..When the next little Latina looks at the faces on CNBC she’ll look up and see a face that looks just a bit like her. After all — if I can, anyone can!
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While we may be frugal, financially free we are not.

That’s why I became obsessed with investing and financial freedom more than 10 years ago.

Before I built businesses and played with money for a living, I was a journalist working along the US/Mexico border. I knew nothing about mutual funds, 401ks (como?), ETFs or the like. And yet I saw millions of my fellow Latinos were getting left behind not because of their race, but because they didn’t have or understand money. The wealthy held all the power and we didn’t. So, I started climbing my way through finance so that when the next little Latina looks at the faces on CNBC she’ll look up and see a face that looks just a bit like her. After all — if I can, anyone can! (Related: Need More Capital? Get Funding for your Startup.)

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But that isn’t enough — because we need change now. That’s why I went to an event by Northwestern Mutual for Latino’s sharing their road to financial freedom. I realized all over again that we Latinos still have much too far to go. 

Here, queridos, is what I would tell myself before I made my money, and what I still tell myself everyday…  

You’re only as good as who you know. 
  1. You make money earning, you keep money by investing.

This means three things:

  • Rule # 1 - you have to work to get wealth, you can’t expect the market to give it to you.

  • Rule #2 - always negotiate for a higher salary (we Latino’s don’t do that enough).

  • Rule #3 - invest before you spend.

Seek out firms known to support minorities and women.

2. You’re only as good as who you know. 

  • Make an advisory board. Just like a company does, leverage those smarter than you. The best part about this is there is no up-front payment for the good ones — they make money when you do. So for me this includes a tax accountant I trust, a financial advisor I trust, and an estate planner I trust. Seek out firms known to support minorities and women — that’s why I worked with Northwestern Mutual! They believe that you’re in control of your money and that your financial goals and planning should look like planning and more like living. #SpendLifeLiving.  For more information about planning your financial future visit, NorthwesternMutual.com; find your local advisor here to schedule a consultation.

Related: Lessons from My Favorite Contrarian Entrepreneur

3. FREE is my favorite four letter word.

  • These days we have so much technology at our fingertips — even free technology. We Latinos just need to use it. 

  • I like Giving Docs for free wills where you can also donate.

  • I use an online budget tracker to keep me in check! 

  • I use the online tool from my financial advisor, like Northwestern Mutual offers here, to track my portfolios performance. 

Related: Make More Money: The One Thing You Should Do Right Now

4. Use Other People’s Money.

  • Your padres were right, don’t spend more than you have. But also, use OPM (other people’s money) when you can. Debit cards win me nothing. If I’m smart with credit, it can pay me back. For example I can use this to tell me where my $$ spent can equal miles flown to a new destination.  

5. The Best Investment: Go look in the mirror — oh there it is!

  • They say many things are common sense, but not common practice. Ain’t that the truth. The best investor is a curious and educated one. 

  • And last but not least, go out and meet more successful humans, more Latinos, hear their stories, and learn from their mistakes. If you want to check out Northwestern Mutual’s next Latino events


And as always, ADELANTE!

Codie

Northwestern Mutual is the marketing name for The Northwestern Mutual Life Insurance Company, Milwaukee, WI (NM) and its subsidiaries. Learn more at northwesternmutual.com

**Sponsored Content**


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Jim Rogers: Investing Legend & Original Nomad

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Jim Rogers: Investing Legend & Original Nomad

A conversation with the Legendary Indiana Jones of Finance.

Best selling author, hedge fund investor, globe trotter (and a bit of my personal hero), Jim Rogers.

I believe it was Thoreau that said, “I could no more name all the books I have read and yet, all the same, they made me.” Truer words for me have never been spoken. But occasionally there comes across my hands a book that I can name and its impact reverberates through my life for years to come. One such book was by the legendary investor Jim Rogers called, “The Adventure Capitalist.” I touched its pages more than a decade ago and it shaped my life in many ways. Jim is a bit akin to the Indiana Jones of finance, he's an explorer, a pioneer and he is not afraid to go against the norm. Basically, he’s anything but your typical investor.

If the world economy gets better, commodities are a very good place to be in... even if the world economy does not improve, commodities are still a fabulous place to be.
— Jim Rogers, "The Adventure Capitalist"

You see Jim has a story, Jim was at the peak of his investing career in the 1970's. He was the co-founder of the industry leading Quantum Hedge Fund with one of the other most famous investors of our time, George Soros. They just had a record year of 127% return on their portfolio and 4200% return over 10 years. Not bad, eh? Then Jim did something that so few do. He left the lucrative high life of Wall Street behind, by choice. He set out to travel the world investing for himself personally in emerging market real estate, third world stock markets, and currencies, all from not a cushy seat in New York, but atop a yellow convertible. Jim decided to continue his emerging market investing spree and circumvented the globe astride a gleaming yellow convertible Mercedes, bedecked with tires able to traverse an African back road just as well as a Californian coastal freeway. This journey led to one of my favorite books of all time, “The Adventure Capitalist.” As if that wasn't enough he wanted to get even closer to the Earth so better to invest in it's trends, aka he traveled around the world astride a motorcycle. That was his book, “Investment Biker.” 

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Order here!

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Order here!

Those who cannot adjust to change will be swept aside by it. Those who recognize change and react accordingly will benefit.
— Jim Rogers, A Gift to My Children: A Father's Lessons for Life and Investing

So you can see why I have to admit when I reached out to Jim to have him on this podcast I thought, “Well, this is a bit of a stretch, to say the least.” Then from the skyscrapers of China, where he currently resides, he responded yes. We spent an hour diving into some of the questions I’ve held close to my vest for a decade. Like how to develop contrarian ideas when the entire world disagrees, how did he get the guts to leave it all behind on Wall Street, what advice would he give to his daughters today, where is the opportunity of the future and what is a belief he holds dear that most of the world would completely disagree with him on.

 

I challenge you if your desire is to travel the world lucratively, invest yourself, or simply understand the inside of one of the most brilliant minds in finance, listen to what Jim has to say.

 

Maybe he'll change your life, just as he did mine. 

 

Un abrazo,


Codie

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