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: I’ve been a journalist for 20 years and can tell you that most press releases are biased fluff trying to get you to bite. Aren’t these pressers coming from these companies about their stocks the same thing?

Brochstein: There’s a lot of fluff. Yes, they tend to overemphasize these types of communications. If they’re saying something in a press release but not a filing, it might mean they’re not willing to say that to the regulators.

The Cannabist: And these investors could lose a lot more than 50 percent, right?

Brochstein: They could lose more than 50 percent. There have been four SEC halts in the last month. Two reopened and dropped 80-90 percent. You can lose more than 50 percent. Technically you could lose everything. These stocks move a lot. Last year, from the peak in February 2013 when I first noticed the pot stock market, it fell 75 percent.

Pot stock infographic: In you invested $100 into pot stocks on Jan. 1, how much was it worth six weeks later?

The Cannabist: Tell me about your own personal portfolio. Are you doing better with pot now?

Brochstein: I don’t invest in stocks. It’s weird. It’s easier for me to be an objective analyst. I’ve never bought a pot stock. Some people said I could have made a lot more money by buying stocks instead of starting the service, but I don’t regret that at all.

The Cannabist: That’s really surprising, that you’re not invested in stocks whatsoever.

Brochstein: I don’t own any stocks. For me to be an analyst, it’s not necessarily a conflict of interest (for me to buy stock) but it can interfere with my objectivity. If I have a position and my client wants me to talk about that stock, I can tell them I own it and it might influence them. It’s like Pete Rose, him betting on the baseball games wasn’t cool. I’d be in an awkward position. If I told people, “Buy this stock,” after I just bought it? In the newsletter industry, there’s already a lot of front running.

The Cannabist: Why so you think people are so fascinated with pot stocks right now?

Brochstein: It resonates with people on different levels. From a commercial aspect: It’s an industry that could be done a lot better, and it’s also coming out of the shadows of the black market. People who have no opinions about marijuana, they see it as a commercial opportunity. There are also the people who would never ingest for recreational reasons, but they appreciate the medical side. A lot of older people feel like the system’s broken, that big pharma is too expensive. And at the other end are the personal-freedom people. There’s also the hardcore users who are tired of being persecuted and are excited about the way the world is changing. I’m not a hardcore user. But I’m all about the personal freedom, health and commercial aspects. And there’s the social aspect, too. People realize we’re wasting all this money on prison systems, law enforcement and it’s just a huge waste. We could redirect that: They recognize the tax revenues could be used for better things like schools in Colorado. I don’t get people being against (marijuana legalization). They say things like, “It’s a gateway drug.” But at the end of the day a legal system that protects children would answer every objection.

The Cannabist: What pot stock might soon be poised for a big move?

Brochstein: Right now Creative Edge Nutrition (FITX) is one of the five stocks I’m recommending on the site. We’ve seen progress with their Canadian project and the completion of their audited financials, and those are two things happening in the next month that can help us learn more and take the stock to a higher price.

The Cannabist: What about a couple pot stocks that would be solid long-term investments?

Brochstein: Two the 420 Investor community really like: GrowLife (PHOT) and Terra Tech (TRTC). The reason people like them: Both of these management teams are the best in the industry. They’re very transparent, and they have the right kind of backgrounds. And they seem to be the central players in the public space. I do a lot of checking myself, and whenever I talk with private companies and journalists, these management companies have scored very favorable in my investigations. I don’t want to say that you can buy them at the price today and they’ll be profitable. GrowLife is 60 cents, but it could drop to 40 cents tomorrow or go to a $1 tomorrow. People thought Google was expensive when it first came out, and it was expensive. Amazon, people said it’s expensive. I’m humble when it comes to the valuation. I’ve been a little bit scared of companies that seem expensive. We don’t know the future, and we underestimate what people can deliver. When I say I like the companies, it doesn’t mean, “Buy the stock right now.”

The Cannabist: There’s 420 Investor criticism out there, including those who say you charge too much.

Brochstein: You get what you pay for in life, and you can read the reviews, which are available on the site without logging in. People aren’t paying for stock picks. At 420 Investor, we’ve raised the price twice, and we’re raising it again. The value isn’t in the stock pics, not that they’re not valuable. There are a lot of free services out there.

The Cannabist: How much are you raising your monthly fees to?

Brochstein: We’re going to raise it to above $50. $42 is a lot, don’t get me wrong. But somebody has to pay for my time and the technology. And when we raise the price, I’m hiring people, we’re investing, I’m creating livelihoods for people beyond myself.