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Recession Proof Cannabis Stocks Part 2: Intellectual Property

Aug 1, 2016 • 12:31 PM EDT
1024px-FemaleCannabisCluster.jpg
2 MIN READ  •  By Michael Berger
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The cannabis sector continues to be one of the most attractive places to invest as the market continues to be negatively impacted by global growth concerns, increasing interest rates, and terror inspired attacks.

Today, Goldman Sachs (GS), one of the largest banks in the world, downgraded its outlook on global equities to underweight as part of its quarterly investment strategy. Goldman’s downgrade comes amid a Brexit-driven rally in risk assets and at a time where valuations are inflated.  

Why Invest in the Cannabis Industry?

Many investors have asked me this question, which is definitely expected, and the answer to me is simple…the cannabis industry is in the early innings of a multi-decade growth cycle that will create more millionaires than the tech boom in the 1990s.

That being said, investors must recognize that they are are investing in developmental companies, which are naturally speculative in nature. Investors who believe in this industry and can stomach the risk are poised see above average returns for years to come if they follow two simple rules.

The most important rule when it comes to cannabis stocks is to create a plan and a strategy for investing. The second most important rule is to do your due diligence and not believe everything you read. Investors must be selective and look extensively into the company prior to investing.

Intellectual Property is a Valuable Asset

Investors and analysts cannot analyze companies levered to the cannabis industry the same way that they analyze regulated stocks. This is because these companies do not receive the same benefits as other industries.

We analyze companies by looking at several important metrics such as its financial structure, management team, business model and recent initiatives, overall liquidity and cash flow, patents and intellectual property, just to name a few items.

We believe that investors and analysts fail to recognize value in company intellectual property and this is primarily due to the complicated valuation methodology.  

Stocks with Unrecognized Intellectual Property Value

MassRoots (MSRT) is a company we continue to remain favorable on as we believe its intellectual property is significantly undervalued.

On Friday, MassRoots announced that more than 100 dispensary locations signed a one year listing contract for its dispensary finder. These locations secured a special rate of $42 a month and MassRoots will generate at least $4,200 in revenue a month from this business opportunity.

Technical420 is favorable on the rapid adoption to MassRoots’ dispensary finder application and this announcement represents an important first step in its plan to monetize its platform.

We remain favorable on the shares after falling more than 3% on Friday due to: 1) its valuation is attractive after the recent sell-off, 2) the company continues to execute on previously stated initiatives, 3) fundamentals are improving as the company lowers its burn rate, and 4) expectation for continued growth.

 

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Authored By

Michael Berger

Michael Berger is Managing Partner of StoneBridge Partners, LLC and Founder of Technical420.com. Prior to entering the cannabis industry, Michael was an Equity Research Analyst at Raymond James Financial covering the Energy Sector. Michael has been featured in publications such as The Street, Bloomberg, US Money News, and hosts various cannabis events across North America.

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