“Wow, this is serious.”
That’s what I thought when I walked into the Phoenix Convention Center over the weekend.
There were business suits and pencil skirts everywhere.
A sea of blue and grey, dotted only occasionally with bright ties.
The signs to the rooms in the convention center said things like “Synergy In Management” and “Supply Chain Risk Management.”
This was nothing like the cannabis conference I was expecting.
Fools And Greater Fools
I asked one of the event concierge’s where the room for the “Future Changes In Marijuana Policy in a Post (Arizona Proposition) 205 World.”
“There are three parts to the convention center. The marijuana is in the South Building.”
I stepped out and turned south.
After a few steps I could see a few skateboarders milling around outside.
As I got closer I saw a man dressed in a giant marijuana leaf costume.
Then another man dressed in a chartreuse suit with black marijuana leaves dotting it like the question marks that covered Mathew Lesko’s suits back in the day (that guy with all the “government is giving away money” ads on TV).
This is what I was expecting.
Here’s my summation.
It wasn’t crowded.
It wasn’t empty.
It was, however, pretty much useless for an investor looking at finding where the money is going to be made.
But I did find one nugget that could pay off millions in the months ahead.
The Best Bet In Cannabis Today
I ran into an old acquaintance at the conference.
He’s an investment banker.
I originally met him a couple years ago via mutual friends.
Bright guy. Always looking for the next big thing.
I wasn’t at all surprised to see him at this potential “gold rush.”
Nor was I surprised to hear him break down the best opportunity for me in a thoughtful and original way.
Like me, he went through the dozens of cannabis-related stocks out there.
We both found nearly all of those to be completely ridiculous.
After all, one of the many cannabis consulting business generating less than $3 million in sales is not worth it’s $50 million market price.
Especially considering the cost of acquiring a cannabis license in Arizona (or, basically a license to print $2 million a year in free cash flow) can be had for $4 million to $6 million.
He did tip me off to one tremendous idea though and it all has to do with the law.
We both agreed that recreational cannabis use passing this year is a 50/50 bet.
It will pass eventually. But maybe not this year.
Despite that, the cannabis growers are gearing up for it in a big way.
The majority of the growers have ramped up production in anticipation recreational use legalization passing on the ballot.
If the proposal does pass, all will be fine.
If it doesn’t pass, that’s where the opportunity comes in.
The industry is walking right into a major supply glut if recreational use isn’t approved and a handful of licensed firms could run into existential financial troubles.
That’s where those of us looking to buy in on the cheap can buy our way in.
Honestly, that’s the best idea I’ve heard yet.
I met with dozens of cannabis-related businesses there.
None of them stood out.
Naturally, this idea is a bit different because it’s actually created by the ballot measure failing.
But that’s the kind of contrarian thinking which it takes to find a great opportunity.
For now, I’ll happily remain on the sidelines.
There may be a good deal out there. But there may be a great deal in a few weeks.
Time and high-priced experience has taught me to wait for the latter whether it’s a stock, commodity, or anything else.