420 Investor's Alan Brochstein — seen here in January, second from right, making his first legal marijuana purchase in Denver — hopes to help legitimize pot stocks. (Courtesy of Alan Brochstein)

Five pot stocks to watch, per 420 Investor guru Alan Brochstein (interview)

The Cannabist: So here you were learning about pot stocks — but what were your feeling about pot at the time?

Brochstein: I’ve been a libertarian my whole life. I believe in legalization. I used marijuana in college, and I also tried it while I was in Colorado in January — for the first time since the ’80s — but not anymore. It wasn’t a passion of mine, but I’m an ardent supporter of legalization. I wasn’t aware of the health benefits when I was getting up to speed last year, February through August. And when August hit, that’s when (Sanjay) Gupta’s “Weed” came out. When I saw that it was an oh-my-god moment. I realized that all across our society people were going to wake up to the potential of medical marijuana, and of course I was aware of Colorado and Washington, but until the federal government gave some sort of symbol that they’d let this happen I wasn’t sure — and later that month at the end of August the Cole Memo came out. And I launched 420 Investor on Sept, 15, 2013.

The Cannabist: So now you’re all about mariuana stocks.

Brochstein: I was lucky. I got in by chance, and it’s worked out really well. I’ve given up everything to focus exclusively on cannabis. I made that announcement a few weeks ago — now 100 percent of what I do is based on cannabis companies.

How did he do that? See how one amateur pot stock investor turned $77,500 to $325,000.

The Cannabist: So the Cole Memo came out in August, but how did it affect the market at that time?

Brochstein: It changed it not only for investors but for the entrepreneurs, too. Who wants to make that kind of risk without knowing if it’s going to pay off? People had ideas that they were not willing to drive forward because there was too much uncertainty. It had an effect on the investors but also on the companies. It was a one-two punch in August, and it promoted me to get into this.

The Cannabist: So business is good at the 420 Investor?

Brochstein: I started the year thinking we could get to 1,000 subscribers, and then we started to grow so fast that I had to start giving up my other business to focus on this space. In early March I realized I couldn’t do it. I closed down everything I was doing — my services for individuals and my relationships. “If it doesn’t work out I can go back to what I was doing.”

The Cannabist: So people pay for your service to get the trade alerts?

Brochstein: People look at my trade alerts, but that’s the least part of the story. We haven’t had a losing trade yet, but it’s a bull market. This is such a bigger thing than my trade alerts though. I feel like I’ve had a very positive impact on the industry. I joined (the National Cannabis Industry Association). People like ArcView and Privateer, all these guys have turned to me as an authority.

The Cannabist: So you feel as if you’re helping your subscribers but also the industry as a whole?

Brochstein: I feel like I’ve had a positive impact on the entire industry. It’s a penny stock industry, but it doesn’t always have to be one. My goal: Help the industry get out of the penny stocks and turn into a legitimate industry. As I said, we’ve attracted a lot of novice investors. A lot of them are younger, some are older and maybe they’re returning to the market after the financial crisis or Internet bubble. We polled our members and 80 percent of them responded that they’re novice or inexperienced. We’re attracting a new investor, and I take it to heart to teach things like risk management and make sure we’re educating people. We can do a better job, we’re working on it. They don’t understand why I’m so conservative. But at the end of the day, the issue for me is that we built this community. It’s not just about stock trading. It’s about learning.

The Cannabist: What else do your subscribers get out of your service?

Brochstein: People are making money and feeling more confident, that’s one. But more interesting: They’re networking with people and finding jobs. We’ve seen a few businesses start within our community. People are trying to get into our community, and this is a good way of doing it. Someone just lost their mother, and just having the sense of community in our forums might have helped. And the people who have walked in January and February are quickly picking up on how people are working toward a common goal.

The Cannabist: What else are you giving them as a professional?

Brochstein: A lot of people are paying for the trade alerts. People from the outside who want to judge it just from that are missing the bigger story. We do weekly chats on Wednesday nights and sometimes on the weekend where I’ll spend an hour or more answering questions. They also have access to CEOs. I did some research on a company and shared it and the CEO — we’re giving memberships to CEOs in the space because we want them to interact with us and be aware of us because we have 2,000 people who care about the space. If they’re good leaders, they should connect with us. Yesterday we had a CEO — Stella Sung of Tauriga Sciences (TAUG) — who came into the forums, answered questions and committed to coming back in the future to interact with investors. She didn’t say anything that was non-public, but people really like having their questions answered. Derek Peterson, another popular CEO with Terra Tech (TRTC), he’d comment occasionally as well, and he’s participated on the site. Investors like that. And CEOs realize that we have serious investors, long-term investors — not just traders — who really care about their space.

The Cannabist: So looking back a year ago, could you have ever imagined the space would look like it does now?

Brochstein: I never would have imagined this. Are you kidding me? I’ve been trying to connect with individuals for a long time.

Read more of our interview with 420 Investor guru Alan Brochstein …