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Cannabis: A New Growth Field
04/04/2016 10:00 am EST
Michael Berger has become a leading expert on the cannabis sector, a market that is just in its early stages of development. Here, we talk with the founder and editor of Technical420 to learn more about this field, what opportunities it presents, and some favorite ideas for investors seeking exposure to this sector.
Steve Halpern: Our guest today is Michael Berger, founder and editor of Technical420, and a real rising star in the advisory world. How are you doing today, Michael?
Michael Berger: I'm doing great today, Steve; how are you?
Steve Halpern: Very good. Thanks for taking the time. Now, many of our listeners may not understand that the name of your company refers to a very specific industry; could you explain?
Michael Berger: Certainly. The name of my company is Technical420. We’re actually focused on the rapidly developing cannabis industry. I came up with the name because specifically, we focus on technical and fundamental analysis — I figured the 420 (a well-known reference to marijuana) — added a nice touch.
Steve Halpern: Now, could you give an overview of the types of businesses within the cannabis sector — and for those that aren’t familiar with the term, that means marijuana- - that are publicly traded? Could you also touch on where these stocks typically trade?
Michael Berger: Yes. This industry has evolved greatly over the last two years. There are over 200 companies that have gone public in these last two years.
And these companies operate in the ancillary, biotech, operational, or retail side of the industry. Most of these stocks trade on the OTC Exchange and about eight of them trade on the NASDAQ and NYSE.
Steve Halpern: A number of them are also traded in Canada; is that correct?
Michael Berger: That is correct. Canada actually legalized medical marijuana at the federal level last year and that industry has kind of seen a real big boom over the last 12 months.
Steve Halpern: Now, recent news about one of the companies that you’ve long been recommending, GW Pharmaceuticals (GWPH), recently caused a huge upmove in the sector. Could you explain what happened and what does this portend for the future?
Michael Berger: Yes. GW Pharma; they actually reported positive stage three FDA clinical testing results for its Epidiolex product. This single-handedly proved that there is medical benefit behind cannabis, which goes against the current Schedule 1 labeling.
After this report, several of the biotech cannabis stocks traded on the NASDAQ saw their price rise by over 100%. These stocks have come down from their highs but we’re currently monitoring them for good entry points.
Steve Halpern: That’s showing the way for many who have been skeptical about the industry; the success here, I would think, is making some people take a second look and realizing that there are some real companies in this field.
Michael Berger: Yes. There definitely is. It’s pretty amazing because they actually studied the plant by using the actual plant, when there are other companies that study a synthetic version of cannabis.
Since they are able to develop a drug strictly from that plant, it gives medical benefits — it shows that medical benefits are associated with it.
Steve Halpern: Now, as one of the few real industry experts in this area, you recently participated in an online cannabis investing seminar. Were you surprised at how many investors are beginning to follow this sector? Perhaps you could highlight some of the things that occurred at the event that might have surprised you.
Michael Berger: Yes. I think everyone was kind of surprised with the amount of demand for information on this industry. We had over 700 people attend the two-day virtual conference and this was out of 1500 total registrations.
We saw over 1000 new people actually log onto the website and become members because they wanted access to this actionable information.
Clearly, the demand is there and it is very interesting monitoring how some of these stocks traded, as they were giving their presentation.
You could see the volume increasing and kind of associate that this had a lot to do with the event and getting that awareness out there.
Several of the companies actually got back to me after the conference saying that they were contacted by potential new clients, shortly after the event, because they wanted to get and create partnerships and start utilizing the services offered by these companies that presented.
Steve Halpern: Now, could you suggest a few names for more-speculative traders to look at in this sector?
Michael Berger: Certainly. Some of the ones that are a little more speculative are — one of my favorites — is called MassRoots (MSRT); they’re considered to be the Facebook of marijuana.
Currently, they have over 775,000 members and they have over 5,500 businesses that use their business-to-business platform.
They’re monetizing similar to the way Facebook does, with advertising. And because cannabis companies can’t advertise on Facebook or Twitter or LinkedIn, they have a huge demand there.
They actually own over 50% of market share in Canada, so I see a lot of upside with that over the long term.
Steve Halpern: With the understanding that risk is relative — particularly in a newly-developing sector — are there any names that might be considered as a lower-risk way to participate in this market?
Michael Berger: Yes. There is actually one that offers a dividend greater than 9%, and it’s called Compass Diversified Holdings (CODI), and they are a holding company, and one of the businesses they own is actually Hemp Foods.
The company trades on the New York Stock Exchange and it’s been pretty stable between the $14 and $16 range. The dividend is secure due to all of the acquisitions and divestitures they’ve made to support the cash flow needs of the company.
Steve Halpern: Again, our guest is Michael Berger, of Technical420. It was really a fascinating look into a sector that’s still under-the-radar for most investors. Thank you so much for your time today.
Michael Berger: Thank you, Steven.
Editor’s Note: To listen to Michael’s presentation and other presentations for the Cannabis Investing Virtual Event, click here!
By Michael Berger, President of Technical420.com
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