Cannabis Corner: Too Small to Trade?

Hilary Kramer

Hilary Kramer is an investment analyst and portfolio manager with 30 years of experience on Wall Street.

Anyone who has been in the market for any length of time knows that while start-up companies have more room to grow, achieving their ultimate potential is a precarious and often lengthy process.

That’s why a conventional short-term investment outlook doesn’t really work on this end of Wall Street. You need to think like a venture capital fund manager and give these positions eight to 10 years to mature.

And you need to accept the fact that even the best managers strike out 80 percent of the time. Most little companies go nowhere. Barely 20 percent turn into triumphs.

We see this all the time in cannabis investing. Beyond the Big Six cultivators, the industry landscape is very sparsely populated until you get down to the micro-cap level.

These are companies too small to support a Nasdaq listing. In many cases, they’re barely a dream priced in fractions of a penny per share.

I see them show up all the time in my proprietary database of regulatory statements. All have hypothetically disruptive business models and great futures ahead of them.

However, a venture capitalist knows 80 percent of them will fail. Great business models hit bad luck. A smarter competitor can emerge or the market itself twists in the wrong direction.

Diversification is essential. Take 10 shots at the goal and come back in a decade. If two of them are still around, they’ll be fixtures of the cannabis universe when 2030 rolls around.

I’ll run through my Tiny Top 10 for cannabis in future columns. One of the freshest is Item Nine Labs Corp. (OTC:INLB), which sold $1.5 million worth of medical marijuana in Arizona last quarter.

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Another is Blue Line Protection Group Inc. (OTC:BLPG). It is a tiny, tiny stock that trades 14 shares for $0.01 but it brought in $1 million last quarter . . . and it doesn’t need to grow much before it generates real profit.

BLPG is unique. It sells compliance and financial services to cannabis retailers. As they multiply, its opportunity expands.

But even though these stocks are making money, they’re still too small for my Turbo Trader Marijuana Millionaire Portfolio. Subscribers would fight each other for the shares and then we’d need to wait up to a decade for the exit.

Otherwise, it’s just playing a penny slot machine. Put your coins in, pull the lever and take what you get. Some people love the thrill, but it’s just gambling.

We don’t need it. I just scored the second big win in our cannabis portfolio. Our positions there are up 7 percent on average, while Big Cannabis is down a harrowing 32 percent. The little stocks move up and down, depending on the minute.

Unless you have a decade to let those little moves stack up to something bigger, I’m happy where we are.

Join me at The MoneyShow Philadelphia!

The MoneyShow is heading to Philadelphia for the first time ever and I’m excited to join some of the country’s smartest professional investors and traders at this complimentary, three-day event, Sept. 26-28.

I will be analyzing sectors and trends, as well as sharing with you time-tested strategies for profiting in the markets. I also will be joined by investing experts such as Bryan Perry, Bob Carlson and Dr. Mark Skousen in discussing stocks, exchange-traded funds (ETFs), income investing, real estate investment trusts (REITs), commodities, trading strategies and much more!

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To register, click here or call 1-800-226-0323 and be sure to mention my priority code of 048290 to receive complimentary admission.

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