I just got home from the very epicenter of America's legal cannabis sector - Oakland, Calif. I have one heck of a head cold right now... yet I've been bouncing all week.
That's because we just closed out the fourth annual Cannabis Business Summit & Expo, probably the biggest, most important legal weed conclave of the year.
We got the chance to talk to some of the giants of cannabis - former president of Mexico and cannabis bull Vicente Fox, for one, and Taylor West of the National Cannabis Industry Association, to name another...
Interestingly enough, two of the most significant (read: profitable) developments I've uncovered for investors weren't all that flashy.
They're interconnected issues that might not blow your hair back at first, but they're pointing to one of the most unusual "pot stock" recommendations I've ever made...
For Investors, These Details Matter
So, here's the really "boring" thing I have to tell you about today.
I'm talking about government compliance and product/service/results-based tracking. These are urgent needs in the cannabis sector right now, and it happens to be exactly why - right alongside all the growers and dispensaries that you'd expect - so many software companies were at this expo.
You see, most pot entrepreneurs start out with little experience in complying with state and local government rules or tracking their products. Plus, when they're just starting out, they don't have the staff to handle this kind of "boring" bureaucratic stuff.
And that boring bureaucratic stuff is critically important in such a brand-new, relatively controversial industry that was, let's face it, almost totally illegal just five years ago.
These businesses need to have all t's crossed and all i's dotted, lest they face crippling, potentially business-ending sanctions.
They need help - and the right software can fill those gaps.
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Plus, check this out: We're now approaching an era when mergers and acquisitions will rise - this is without question. And buyers will only go after smaller firms of the highest quality. If they don't have their compliance and tracking in order, those acquirers will keep on fishing for more attractive fish.
The stakes are high, and a lot of smaller operators simply don't have experience with government regulation or the manpower to pay it the attention it needs without tech software to do the heavy lifting.
Chet Billings, a major venture capital player in the legal weed sector, put it to me like this: It's like in the 1980s and 1990s when mom 'n pop video rental shops still proliferated the landscape.
Eventually, Blockbuster came along and bought up the best video stores in each town. Hollywood Video picked up the second-best ones. And the dustiest, most unfriendly places got left alone - and went directly out of business.
"Why would you want a ratty, local dispensary that resembles an old video store?" Billings said.
Of course, even the giants of video land eventually became obsolete themselves thanks to streaming media from the likes of Netflix Inc. (Nasdaq: NFLX) and Amazon.com Inc.'s (Nasdaq: AMZN) Prime service. (We might see something similar happen when cannabis-based treatments depose opioids.)
And here again is where compliance is key.
"One false key stroke is a permanent violation," said Jordan Wellington, director of compliance at the firm Vicente Sederberg LLC. "You get enough of those noncompliance violations - and you lose your license," he warned.
And that brings us to my most unusual pot stock play. I've shared it with my Nova-X Report readers as a kind of bonus to the 30 stocks in my "weed investors' bible," The Roadmap to Marijuana Millions. (Note: Click here to find out how to get your own copy of the Roadmap.)
What's more, it's a name you've probably heard before, but I bet you haven't thought of it as an absolutely fundamental investment in the legal cannabis sector.
"Mr. Softy" Rides to the Rescue for Entrepreneurs and Investors Alike
It's not front-page news, but Microsoft Corp. (Nasdaq: MSFT) has made a big commitment to developing these tools for the legal marijuana sector.
Ever since June 2016, Microsoft has used its ultra-powerful software and cloud services to become the go-to source for the cannabis industry. As M&A activity picks up, Microsoft's roster of cannabis customers will only grow.
And there are a lot of brilliant startups that will be pushing the likes of Microsoft to keep upping their game.
Either that, or Microsoft will simply buy them out to fill a gap.
Only marijuana firms with the best compliance and tracking programs will thrive in a space that more and more big-cap corporations are moving into. "If you don't," Wellington says, "some rich, old guys are going to steamroll you."
To me, that means when you're investigating pot stocks, don't just look at growers or dispensaries. Also take a gander at the "pick and shovel" plays that are developing the tech tools those companies need to survive and thrive.
The trends we're seeing and tips we've picked up here at the expo have the potential to be extremely valuable. I'm sharing every single one of them with my paid-up Nova-X Report subscribers. You can click here to find out how you can get them, too.
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About the Author
Michael A. Robinson is a 36-year Silicon Valley veteran and one of the top tech and biotech financial analysts working today. That's because, as a consultant, senior adviser, and board member for Silicon Valley venture capital firms, Michael enjoys privileged access to pioneering CEOs, scientists, and high-profile players. And he brings this entire world of Silicon Valley "insiders" right to you...
- He was one of five people involved in early meetings for the $160 billion "cloud" computing phenomenon.
- He was there as Lee Iacocca and Roger Smith, the CEOs of Chrysler and GM, led the robotics revolution that saved the U.S. automotive industry.
- As cyber-security was becoming a focus of national security, Michael was with Dave DeWalt, the CEO of McAfee, right before Intel acquired his company for $7.8 billion.
This all means the entire world is constantly seeking Michael's insight.
In addition to being a regular guest and panelist on CNBC and Fox Business, he is also a Pulitzer Prize-nominated writer and reporter. His first book Overdrawn: The Bailout of American Savings warned people about the coming financial collapse - years before the word "bailout" became a household word.
Silicon Valley defense publications vie for his analysis. He's worked for Defense Media Network and Signal Magazine, as well as The New York Times, American Enterprise, and The Wall Street Journal.
And even with decades of experience, Michael believes there has never been a moment in time quite like this.
Right now, medical breakthroughs that once took years to develop are moving at a record speed. And that means we are going to see highly lucrative biotech investment opportunities come in fast and furious.
To help you navigate the historic opportunity in biotech, Michael launched the Bio-Tech Profit Alliance.
His other publications include: Strategic Tech Investor, The Nova-X Report, Bio-Technology Profit Alliance and Nexus-9 Network.