- Marijuana insiders told us the three biggest mistakes investors make in the sector.
- These are the two biggest indicators you need to look at before investing in a pot stock.
Legal marijuana sales are expected to skyrocket 145% in just three years, jumping from $10 billion in 2017 to $24.5 billion in 2021.
But not all pot stocks are good investments…
As we've told Money Morning readers before, the marijuana industry is still considered the "Wild West," and certain companies are more than willing to take advantage of uninformed investors.
That's why I reached out to experts in the cannabis field to share their advice on how to avoid scams when investing in cannabis stocks.
That can help you find the best investments to make so you can stake your claim in the future $24.5 billion industry…
Top Marijuana Insiders Share the Biggest Mistakes to Avoid
The insiders I talked to aren't just blogging from their parents' basements.
They are CEOs, CMOs, and presidents.
Having direct insight from them gives you an edge over all other retail investors buying marijuana stocks.
The 4 Cannabis Stocks to Buy Now – Profits of up to 1,000% could be likely this election year!
Colby McKenzie is Interim CEO of Enlighten, a full-spectrum enterprise solution managed by a team with a collective 20 years of experience serving Fortune 500 companies, first-class retailers, and top-end brands all over the world.
He's warning investors about flashy marketing gimmicks designed to lure you into forking over your cash for little in return:
"Unfortunately, and this is not exclusive to cannabis, there are many suspect investment opportunities in the space with flashy business concepts and little substance. Being an investor myself, as well as a CEO of a company in the space, I think it is paramount to do proper diligence before investing in any company in this industry. If a company cannot easily provide projected financials, a concise business plan or pitch deck, and detailed backgrounds on the management team, it is probably time to move on."
Arnaud Dumas de Rauly is the co-founder and co-CEO of The Blinc Group, a distribution-centric vapor and cannabis business incubator. The group delivers full-cycle support to start-ups and entrepreneurs through tailored branding, marketing, sales, and engagement programs rooted in data and proprietary research, while also positioning member companies as thought leaders and scaling through large distribution channels.
He explains one of the biggest risks behind marijuana firms is regulation:
"The biggest mistake, and subsequent risk, when investing in cannabis is making sure the team understands regulations in the markets in which they are present, whether they are state-specific or country-specific. This can be done in a few different ways: is the management team involved with any industry associations? Is anyone on the board of managers or advisors a regulatory or compliance expert? And finally, does the company have a compliance procedure in place?"
Mitch Britten is the CEO of Thrive Cannabis Marketplace and Green & Gold Supply Co. Thrive Cannabis Marketplace is a Nevada-based dispensary brand with two locations (one in Downtown Las Vegas and one in North Las Vegas). Green & Gold Supply Co. is a Nevada-based cannabis cultivation firm.
Britten told me the biggest mistake investors make in the marijuana sector:
"In my opinion, the biggest mistakes someone can make when entering the cannabis space are investing in a group that is depending on a third party or consultant to serve as their operator. Investing in a group that has an operator with a financial commitment/investment in the organization and a demonstrable track record is crucial to the success of any cannabis company. Second to the operator, make sure the finances are in order, the organization is properly funded, and the previous years' federal taxes have been filed with 280E in consideration."
Wil Ralston is the president of SinglePoint Inc. (OTCMKTS: SING), a publicly traded cannabis and technology holding company specializing in acquisitions of small- to mid-sized companies with an emphasis on mobile technologies and emerging markets.
Ralston offered us some good advice on how to spot a good opportunity:
"When evaluating different investment opportunities in the cannabis space, it is important to look at a few key factors. Some of these include, could the business be heavily affected by the regulation changes? Is it ancillary to the market or is the company producing and selling cannabis directly (the factors may heavily contribute to regulation changes)? And lastly, who is the team comprised of? What's their history, have they always been entrepreneurs, business owners, executives? Or did they just jump into the frenzy? Thinking about these things can really help determine whether an investment is a viable opportunity to hold, flip, or shy away from."
Stephen Gardner is the CMO for Tikun Olam, the world's new benchmark for trusted, consistent, clinically proven cannabis. Now coming to America, Tikun plans to build on the brand heritage, cultivation experience, and clinical research established by Tikun Olam Israel.
Gardner told me how to avoid making a costly mistake when investing in cannabis:
"The challenges of investing in the cannabis space are numerous, but careful preparation and laser focus can help you avoid costly mistakes. When looking at a cannabis investment, make sure the company has a product or brand which is a clear standout in the market you wish to break into. Are the product offerings better made, better tasting, of higher quality, or just something different than what is already out there? If it is not one or all of the above, you are taking a large gamble with your investment."
Mark Adams is the CEO of Convectium, a one-stop shop for cannabis retailers' sourcing, packaging, shipping, or domestic/international manufacturing needs.
Adams says a worthy marijuana firm has these two things…
"Investors in cannabis should make sure a company has two things. First, a solid path to profitability. A lot of people make the mistake of throwing money in the space without understanding the business model of the company. This can be disastrous. Second, the company should be a true differentiator in the marketplace, not just a "me, too" player. Companies like ours that have a solid foundation in automation as well as continued new product development and engineering offer both immediate and long-term value."
That was great advice from cannabis insiders.
And today, we wanted to show you how to access a report from a renegade investment expert who says it's time to double down – or even triple down – on your cannabis investments.