“Most of these stocks are not legitimate.”
That’s professional investor Alan Brochstein talking about the red-hot pot stocks that have much of the investment world in a tizzy. Brochstein, an investment industry professional since 1986, has made an impressive living off these pot stocks — most of which are highly volatile penny stocks derided by most professionals.
But instead of cashing in on pot stocks’ ebbs and flows in a bull market, Brochstein actually has no money invested in these funds. He is, however, a guru to more than 2,000 investors who pay $42 per month — and soon more than $50 per month — for his advice, trade alerts, market videos, professional perspective and access to the industry via his 420 Investor service.
And some of his followers are turning pot stocks into cash.
“There are people within our service who have already made $1 million,” Brochstein said.
As legal recreational marijuana sales were starting in Colorado on Jan. 1, Brochstein had fewer than 200 paid subscriptions to his 420 Investor service on Marketfy. “I wanted 420 (subscribers) by 4/20,” Brochstein said of his early-2014 goals.
And then the word started to spread. Pot stocks are risky, but they’re also real.
“We started the 420 Investor in September of 2013,” said Kyle Bazzy, president of Marketfy owner Benzinga. “On the first of this year membership was just shy of 200. Now there are over 2,000 420 Investors in Alan’s community. The growth has been amazing to witness.”
Adds Brochstein: “I would not be surprised if we had more than 3,000 by end of April.”
Brochstein and Marketfy split the revenue from 420 Investor’s subscriptions, but “Alan receives the lion’s share of revenue,” Bazzy said. It’s certainly a living — with overall revenues topping $84,000 per month in their current structure and more than $150,000 per month after they up the subscription fee and reach 3,000 paying users.
We caught up with the very busy Brochstein earlier this week to talk about what pot stocks he’s passionate about, why he feels his service is worth $50 per month and the first annual Cannabis Investor Conference (nicknamed “WeedStock”) he and Marketfy and putting together in Denver at the end of June.
The Cannabist: So pot stocks are like the Wild West?
Brochstein: This is one of the coolest things I’ve ever seen. I’m coming from the stodgy world of investing, so that’s not saying much.
The Cannabist: It is cool, but it’s also very risky.
Brochstein: Yes, and I want to make sure people know about the risks. Some investors make it sound really easy, but they’re fortunate to know that they’re fishing in a really good pond — and that doesn’t make you a good fisherman.
The Cannabist: Right, the market has been kind.
Brochstein: In a bull market, everybody makes money. It’s like Warren Buffet’s quote: “You only find out who is swimming naked when the tide goes out.” Everybody’s a genius now, because all you had to do is buy pretty blindly. This market has surprised me that it’s been this strong.
The Cannabist: Who is the average 420 Investor?
Brochstein: I’m dealing with a lot of novices. I like to educate people. This is frontier investing, and the valuations are really high — no pun intended — and there are certainly things an investment professional can help with. It’s easy to say, “Don’t buy any of these stocks.” I could have said that three months ago, but people would have missed out on a lot of money. Instead I’d rather say, “Let’s figure out who has the right business models and who has the better management teams.” And hopefully people won’t lose a lot of money.
The Cannabist: What was your career like before pot stocks?
Brochstein: It was plain, vanilla career. I started on Wall Street in 1986, and I was in New York for eight years. I came back to Houston, worked in bonds, switched to stocks — it was a regular money manager career. I left in 2006 and started my own firm. For the last while I’ve been working with institutional investors as an independent research analyst. And I had a couple subscription services. And I was and am blogging on Seeking Alpha, one of the leading investment portals on stocks and the economy. About a year ago in February, I stumbled into this pot stock world and just slowly but surely became more and more immersed in it.
The Cannabist: What did “this pot stock world” look like when you first came across it?
Brochstein: You had a few marijuana stocks but no professional investors were worried about it. The valuations were crazy. Some of the companies weren’t treating their shareholders right. I took an institutional approach when I talked about them on Seeking Alpha. For the first few months I was viewed as negative — primarily because I was warning people about the risks.