The cannabis industry is booming. It’s currently looking at possibly generating nearly $7 billion in sales for 2016 and that’s expected to go up to over $20 billion by 2020. Many people are interested in getting in on this growth and investing in the market, but a large majority have never been involved in investing before. Here’s where Jason Spatafora, the Wolf of Weed Street, as he’s called, fits in to offer advice towards successful marijuana investments.
Spatafora said he was already investing in other industries when he got into the cannabis market. He decided it was time to start looking at the industry when he heard former Attorney General Eric Holder announce that Department of Justice wouldn’t interfere with Colorado and Washington’s legal cannabis markets.
He had never invested in penny stocks, stocks valued at less than a dollar, but there were many available for cannabis businesses, so he went in that direction. His first investment went up 50 percent in one day, which was very exciting, but then it went down 50 percent the next day. He recognized this was a very volatile market and decided to do more research and track the trends.
Spatafora learned some things about the industry and started investing more successfully. Once he had made a sizable amount of money, he decided it would be smart to invest in the information market surrounding cannabis, so he purchased MarijuanaStocks.com to start writing about the industry and monetizing that website.
Spatafora has a lot of advice when it comes to investing in cannabis and investing in general. First of all, he said not to imagine that doing penny stocks is going to make you rich overnight.
“If you’re trying to pay your mortgage by doing penny stocks, then I think you’re insane,” he said. “I see investing, not just in the cannabis space but all over the place, is in efficiency technology, as far as disruptive apps and whatnot. These are the Ubers, the Airbnbs, stuff that takes advantage of something being out in the marketplace and then allows everyday people to monetize it or makes the process of finding something a lot easier.”
Spatafora said he doesn’t think there are many established brands in the industry yet, so it’s going to be important to watch for successful new brands that may expand quickly. “There’s going to be some kind of brand war,” he said. “Somebody’s gonna want to be the McDonald’s of pot or the Anheuser-Busch of hemp-based drinks.”
Beyond that, his main advice for new investors is for people to realize that investing directly into the established, big names isn’t always the best option. Sometimes it’s better to invest in things associated with that brand.
“At the end of the day, the people who are going to make money are the ones who invest in the picks and the shovels,” he said. “Look at an iPhone. I could go out and buy Apple stocks for $100 per share if I wanted, or I could invest in the company that makes the screens. You invest in the components.”
Spatafora said he started his investing career with just $500 to invest, and he’d put a little toward investing every paycheck. It’s not always about having a lot of money to devote towards stock.
As for how the industry is changing, Spatafora believes one of the biggest changes that could happen in the next year is the rescheduling of cannabis. The DEA recently announced it will be meeting to discuss this by the middle of the year.
He said he thinks it’s ridiculous that cannabis is put in the same schedule, Schedule I, as a drug like heroin. “Marijuana doesn’t kill people,” he said. “There’s a lot of data that says it’s good for certain things. If it’s so bad, why are all of these pharma companies trying to synthesize it or recreate it?”
If rescheduling doesn’t happen, and he said it seems unlikely it will happen this soon, he believes the biggest change will be with the Federal Government and Congress deciding to do something about cannabis businesses not being able to put money in banks.
“What they’re doing is creating this cash market that’s very dangerous,” he said. “They need to be able to track the money somehow, and right now they’re basically forcing people to legally launder their money.”
Either of these changes will legitimize the cannabis industry beyond where it currently stands, which will certainly promote further investment and growth. Regardless of what happens, it seems pretty clear the industry is going to keep pushing forward and changing in innumerable ways.
Have you invested in the cannabis industry? Tell us your strategies for success.