Cannabis stock investor speaks about new market
By Nick Muscavage and Connor Murphy
Marijuana stock investor and creator of the service 420 Investor, Alan Brochstein recently gave a lecture at the University at Albany. Taking an unusual tactic for his lecture, Brochstein hosted his lecture and Q&A via Skype in Lecture Center four. Directly under the screen on which Brochstein was projected hung a UAlbany poster reading, “Most UAlbany students choose not to smoke marijuana.” The lecture was hosted by UAlbany Stock Exchange.
After graduating from Northwestern University in 1986, Brochstein began working for Kidder, Peabody and Co., a U.S based securities firm. He spent the next six years dealing with mortgages and asset-backed securities before moving onto First Boston, a New York City based bulge bracket, investment, where he worked as Head Trader for two years. In 2000 Brochstein moved back to his hometown of Houston, Texas, which was where the Skype lecture was broadcasted from. Upon his return to Houston, Brochstein began dealing with stocks. In 2013, when marijuana stocks became publicly tradable, Brochstein shifted all his focus onto the cannabis industry.
Brochstein did not claim to be an expert on cannabis. “I’ve always believed in marijuana legalization, without knowing much about it,” he said. Not knowing much about marijuana stocks until 2013, he found out that the industry was insane. “People were paying outrageous prices for crappy companies. We fast-forward about 18 months and all of sudden everyone and their brother has a pot stock,” he said with excitement.
The problem with marijuana stocks is that they are all penny stocks, which means that the system is unregulated and volatile. He named a few stocks that he has been paying attention to. GW Pharmaceuticals, which is one of them, has been on the NASDAQ since May 1, 2013.
I mentioned Biotech and that’s very risky, so if I say that’s the best, keep in mind it’s very risky,” said Brochstein. He continued, “When you’re investing in a company you don’t like to be an all-or-nothing. Often these Biotech companies are betting it all on one drug. That’s probably my favorite stock, because all the rest are penny stocks. I’m not going to recommend any U.S. stocks right now. If you decide to invest in any of them, treat it like you’re going to Atlantic City or Las Vegas.”
GW Pharmaceuticals has been doing extensive research on cannabinoids, chemical compounds extracted from cannabis, and the positive effects they can have for treating illnesses like epilepsy and post traumatic stress disorder in war veterans, according to Brochstein. He also went onto to explain the tax money increase in Colorado and Washington over the past year and how the same increase could be applied nationally if it weren’t for the way some states pursue marijuana policy.
It’s a state-by-state process. There’s some misconceptions out there. Some states can only pass medical marijuana legislatively. It takes a long time just for the medical. Even when a state approves medical, the programs aren’t always great. You look at the state of New York not setting up a good plan. The access is very low,” he said. Actual legalization will be a lot slower, according to Brochstein.
He also was in support of other sorts of cannabis involved company stocks such as MassRoots, a social networking site that features a community forum where users can share their experiences with marijuana, the legalization process, and other cannabis related topics off of Facebook and out of view from family, friends, and potential employers.
Brochstein founded a service of his own called 420 Investors. The website is a place where marijuana stock investors, like Brochstein himself, can communicate with other investors as well as potential investors.
Marijuana stocks are new to the public stock market and some stocks are not always what they are made out to be, Brochstein pointed out. In April and May of 2014, the U.S. Securities and Exchange Commission seized the trading of six marijuana stocks due to federal investigation. One of the stopped stocks was Growlife on April 9, only to resume trade on April 25.
Brochstein warned against this sort of unpredictability, and although he is an avid supporter of openly traded cannabis stocks, he is also in favor of more regulation because it could protect the already existing positive stocks as well as defend against sham stocks out looking to make a quick buck. He also warned against misconceptions and fallacies when it comes to pharmaceutical companies attempting to stop the trading and flourishing of the marijuana industry, even though he is a firm believer that marijuana is a healthier alternative to opioids and other narcotics. “When it comes to marijuana there’s a lot of paranoia,” he said.
Brochstein enjoyed smoking marijuana in college but after graduation he hadn’t smoked it in 24 years until he visited Denver, Colorado. He is a member of NORML, an organization that focuses on marijuana awareness and policy reforms. He also urged students to get involved with Marijuana Policy Project if they are interested in the industry’s advancement. When opened to the audience of students for questions, one student asked what Brochstein’s favorite sector was besides cannabis. He answered, “I don’t really focus on anything besides cannabis.”