Introduction 1
About This Book 1
Foolish Assumptions 2
Icons Used in This Book 3
Beyond the Book 4
Where to Go from Here 4
Part 1: Getting Started with Cannabis Investing 5
Chapter 1: Taking the Nickel Tour 7
Weighing the Pros and Cons of Investing in Cannabis 8
Pros 8
Cons 9
Deciding Whether to Invest in Businesses That Touch the Plant or Those That Don’t 11
Exploring Your Investment Options 12
Starting your own business 12
Investing in cannabis real estate 13
Buying and selling stocks 14
Diversifying with exchange traded funds and mutual funds 15
Considering private investment opportunities 15
Finding Investment Opportunities 16
Researching Investment Opportunities 17
Planning Your Investment Strategy 19
Investing in a Cannabis Business 20
Chapter 2: Exploring Cannabis Business Types 23
Choosing Sides: Medical or Adult-Use? 24
Investing in medical marijuana 24
Investing in adult-use marijuana 25
Recognizing Different Cannabis Business Types 26
Cultivation 27
Manufacturing 28
Processed product brand 30
Retailers/dispensaries 30
Device makers 31
Considering Ancillary Businesses 31
Breweries 32
Banking, payroll, and other cash management services 32
Blockchain and other technologies 34
Delivery services 34
Grow equipment manufacturers and suppliers 35
Marketing, public relations, and advertising firms 35
Professional employer organizations 36
Pharmaceutical and biotech companies 36
Real estate 37
Security services and security equipment suppliers 38
Software companies 38
Chapter 3: Understanding the Political, Cultural, and Regulatory Landscape 39
Recognizing the Impact of Laws on the Industry 40
Getting up to speed on U.S federal law and enforcement 40
Brushing up on state cannabis laws 44
Considering local laws, too 45
Examining cannabis laws in other countries 46
Riding the Waves of Politics and Culture 46
Checking the nation’s pulse 47
Debunking misconceptions of cannabis and users 49
Examining activism 50
Tuning into cannabis culture 52
Accounting for the High Costs of Doing Business 53
Regulatory and compliance costs 53
Federal, state, and local taxes 54
Security costs 55
Chapter 4: Sizing Up the Risks and Rewards of Cannabis Investing 57
Weighing the Risks 58
Falling victim to con artists 58
Investing in an overvalued company 60
Accounting for dilution risks 61
Weighing the risks of potential commoditization 62
Recognizing the possibility of changes in how federal marijuana laws are enforced 63
Considering the impact of state and local regulation and enforcement 64
Evaluating risks associated with obtaining banking and financial services 65
Anticipating the impact of possible supply and demand imbalances 65
Considering the possibility of business failure 67
Assessing the Potential Rewards 67
Deciding Whether Investing in Cannabis is Right for You 68
Considering your investment goals 68
Assessing your own risk tolerance 69
Part 2: Doing Your Homework 71
Chapter 5: Exploring Your Investment Options 73
Comparing Public versus Private Investment Options 74
Understanding how companies raise capital 74
Investing in private companies 76
Investing in public companies 78
Investing Domestically or Abroad? 79
Investing in Cannabis or Ancillary Businesses? 81
Buying and Selling Cannabis Stocks 83
Going mainstream with listed stocks 83
Bargain hunting with unlisted, over-the-counter stocks 84
Diversifying with exchange traded funds 84
Betting on an index with exchange traded notes 86
What about mutual funds? 86
Buying and selling shares of Canadian cannabis companies 87
Investing as a Venture Capitalist 88
Chapter 6: Digging Up Cannabis Investment Opportunities 89
Using Online Investment Tools and Apps 90
Cannabis Stock Trades 91
Yahoo! Finance 91
Morningstar 92
FINVIZ 92
ETFdb.com 93
FeeX 93
FRED 93
The Marijuana Index 94
Marijuana Stocks 94
Barchart 94
Apps 95
Staying Abreast of Cannabis Industry News 96
Scoping Out Opportunities in Exchange Traded Funds 100
Finding Private Equity and Venture Capital Funds and Firms 101
Getting Investment Leads from a Broker 102
Chapter 7: Researching Cannabis Businesses and Stocks: Fundamental Analysis 103
Grasping Fundamental Analysis Basics 104
Researching Any Company You’re Thinking of Investing in 106
Assessing the management team 106
Evaluating the company’s financial health 109
Evaluating startups and investments in licenses 111
Looking at the company’s business strategy 112
Checking out the company’s competitive position 115
Checking any insider buying or selling 116
Looking into warrants and convertible securities 117
Following analyst coverage and conference calls 119
Digging up dirt 120
Evaluating Cannabis Cultivation Businesses 121
Sizing up the grow master 121
Checking a grower’s cost per gram 122
Comparing cost per gram 123
Considering the cultivator’s clientele 123
Chapter 8: Analyzing Market Trends: Technical Analysis 125
Comparing Technical and Fundamental Analysis 126
Grasping the principles of technical analysis 126
Weighing the pros and cons of technical analysis 128
Combining the best of both worlds 129
Gathering your tools 130
Spotting and Monitoring Trends 131
Examining different trends 131
Gauging a trend’s length 134
Following trendlines 134
Looking for resistance and support 135
Referencing Technical Charts 136
Getting to know the different chart types 136
Identifying chart patterns 138
Interpreting Technical Indicators 143
The Relative Strength Index 143
The Money Flow Index 144
Moving averages 144
Moving average convergence divergence 144
Bollinger Bands 145
Part 3: Buying and Selling Cannabis Stocks, ETFs, or Mutual Funds 147
Chapter 9: Choosing a Broker or Advisor 149
Defining the Broker’s Role 150
Distinguishing between Full-Service and Discount Brokers 150
At your disposal: Full-service brokers 151
Just the basics: Discount brokers 153
Deciding Whether to Fly Solo or Consult a Broker or Advisor 154
Finding a Cannabis-Savvy Broker or Advisor 155
Evaluating Brokers and Advisors 155
Comparing costs 156
Comparing quality and service 156
Checking credentials 157
Comparing online brokers 158
Chapter 10: Using Screening Tools 161
Searching the Marijuana Stock Universe 162
Getting Up to Speed on the Different Exchanges and Markets 165
Browsing through the Daily Marijuana Observer’s List
of OTC Cannabis Stocks 167
Checking Out Other Stock Screeners 168
Screening Cannabis Investment Funds 170
What to Screen for 172
First up: The major categories 172
The main event: Specific filters 173
Valuation measures 175
Financial Highlights 176
A Few Final Points to Keep in Mind 176
Chapter 11: Placing Buy and Sell Orders for Cannabis Stocks and ETFs 177
Understanding the Bid-Ask Spread 178
Placing an Order to Buy or Sell Shares 179
Choosing an Action 182
Buy 182
Sell 182
Sell all shares 182
Understanding the Different Order Types 183
Market orders 184
Limit orders 184
Stop orders 185
Trailing stop orders 186
Specifying a Timeframe 187
Day 187
Good till canceled 188
Fill or kill 188
Immediate or cancel 188
Market on open 189
Market on close 189
Chapter 12: Exploring Advanced Trading Techniques 191
Buying on Margin 191
Registering to buy on margin 192
Examining marginal outcomes 193
Striving for success on margin 194
Shorting a Stock 195
Setting up a short sale 196
Taking a hit when the stock price keeps rising 197
Responding when you feel the squeeze 198
Recognizing the ups and downs of shorting cannabis stocks 198
Part 4: Exploring Cannabis Investment Strategies 201
Chapter 13: Following the Money: Momentum Investing (aka Speculating) 203
Spotting Opportunities to Buy: Upward Momentum 204
Watching for Signals to Sell: Downward Momentum 207
Following the Smart Money 208
Avoiding Some of the Risks Inherent in Momentum Investing 209
Watching out for the short squeeze 209
Steering clear of pump-and-dump scams 210
Avoiding cannabis stock and industry bubbles 211
Knowing when momentum investing works and when it doesn’t 211
Chapter 14: Investing in Canadian Cannabis Companies 213
Deciding Whether to Invest in Canadian or U.S Cannabis Businesses 214
The pros and cons of the Canadian cannabis market 214
The pros and cons of the U.S cannabis market 216
Scoping Out the Four Leading Canadian Cannabis Companies 217
Canopy Growth Corporation 217
Cronos Group 218
Aurora Cannabis 218
Aphria 219
Chapter 15: Investing in Countries Where Marijuana is Legal 221
Argentina 222
Australia 223
Brazil 224
Chile 224
Colombia 225
Czech Republic 226
Ecuador 226
Germany 227
Greece 227
Ireland 228
Israel 228
Italy 229
Jamaica 230
The Netherlands 230
New Zealand 231
Norway 232
Peru 232
Poland 233
Portugal 233
Switzerland 233
Thailand 234
United Kingdom 234
Zambia 235
Chapter 16: Minimizing Risks While Maximizing Gains 237
Staying Plugged in to the Industry 238
Investing in the People, Not the Plant 239
Performing Your Due Diligence 239
Trading Cannabis Stocks on Private Markets 240
Investing in the Biggest Markets 241
Diversifying Inside and Outside the Industry 241
Investing in Multi-state Operators 242
Keep an Eye on the ETFs 243
Invest in Innovative Companies 244
Use Different Stock Order Types to Your Advantage 245
Don’t Get Greedy 246
Part 5: The Part of Tens 247
Chapter 17: Ten Ways to Profit When the Market Drops 249
Be Patient, But Vigilant 250
Review Your Portfolio 250
Cut Your Losses 250
Buy More Shares 251
Focus on Value Stocks 251
Short Bad Stocks 251
Find Potential Treasures with Bond Ratings 252
Rotate Sectors 252
Buy a Call Option 252
Write a Covered Call Option 253
Chapter 18: Ten Reasons Not to Invest in Marijuana Stocks 255
Marijuana is Still Federally Illegal in the U.S. 256
Marijuana Investment Scams Are Rampant 256
Earning a Profit as a Cannabis Business is a Huge Challenge 257
Illegal Operations Undermine Demand for Legal Products 258
The Industry is Very Fragmented 258
Oversupply is More Likely Than Not 258
Bad News is Just Around the Corner 259
Marijuana Laws Are Slow to Change 259
Company Shares Are Being Diluted 260
Demand is Unpredictable 260
Chapter 19: Ten (Plus One) Criteria for Choosing a Cannabis Investment 261
Experienced and Successful Management Team 262
Steady Revenue Growth 262
Consistent Profit Growth 263
Comparatively Low Price-to-Earnings Ratio 263
Positive Money Flow Indicator 264
Expanding Free Cash Flow 264
Operations in Other States or Countries 264
Growing Market 265
Increasing Market Share 265
Positive Reputation in the Industry 266
Manageable Debt 266
Chapter 20: Ten Mistakes to Avoid 267
Failing to Diversify Sufficiently 267
Relying Solely on Online Information 268
Not Performing Due Diligence 268
Believing Federal Legalization Will Happen Soon 269
Failing to Account for Regulations 269
Failing to Consider the Possibility of Bad News 269
Buying or Selling Too Late or Too Early 270
Ignoring Business Fundamentals 270
Expecting All Marijuana Stocks to Be Winners 271
Buying a Stock Just Because It’s Cheap 271
Index 273
