How Accredited Investors Should Follow The Marijuana Trend

The medical marijuana/cannabis industry has become legalized in many countries around the world and that trend is only gaining momentum. While the last year has been an extreme roller coaster ride for most investors in the cannabis market, we can feel confident that this trend is still at the early stages, well established and on an upward momentum longer term.  The rise and fall in stock prices at the end of 2013 and the beginning of 2014 was a result of hot money coming in and out of the sector, illiquid markets and tight share structures.  But what we didn't see during that time is the participation from the institutional and professional money crowd.

To be successful at investing, most sophisticated investors like to follow trends and get invested early while the trend is gaining momentum. Once you have maximum participation from the retail investing crowd, we can be assured the trend for that sector had pretty much peaked and will soon reverse.

Starting the middle of this year, we have seen participation by professional money managers, brokerage companies and accredited investors. These investors usually don’t buy stocks in the open like most retail investors do. Remember they are sophisticated when it comes to investing and they understand the best way to get invested in a longer trend, which is usually via private placements. The professional money managers know to get invested with the best companies at the earlier stages where financing is needed and they can acquire big blocks of shares via private placements and bought deals. 

When it comes to managing funds, these professionals usually stay invested for the longer haul with a 3 to 5 year time horizon. They usually take a longer term view for investing when it comes to secular trends where they can maximize their profits. Their investment strategy is to buy early and exit their positions and sell shares to the retail investor at the peak of the bull market when excitement is extremely high. 

The trend for investing in the cannabis sector is gaining momentum, but we are still at the early stages and now is the best time to be an investor in this space as we still have tremendous upside over the next few years. Knowing the professional money manager’s investment timeline and exit strategy can help the average investor piggy back on their strategy for investing within a larger trend. Since managed money is now entering the market, we can be assured that the investment trend in the marijuana sector still has another 3 to 5 years to go. 

While most retail investors do not have access to private placement deals, there is an investor class that can benefit from the larger trend and get invested alongside the professional money managers, they are called Accredited Investors. This essentially means you have a net worth of over one million dollars or several hundred thousand dollars of income each year. To see if you qualify to get access to the best private placement deals in the marijuana industry, you can view the accredited investor guidelines for both US and Canadian residents.

This is an exciting time to be an accredited investor since the opportunities to get invested early in private placement deals with the right companies can be very rewarding. Most private placement deals are not offered to the average retail investor, but sophisticated accredited investors know the value of placing money during early rounds of funding. This is where most of the gains can be captured, but the risks are usually the highest.  If you qualify as an accredited investor, you should take the opportunity to evaluate these private placements while they are available during the early stages of financing required by these companies.

The big fund managers are just starting to enter the marijuana industry, but at the moment many are reluctant to invest in private placements because of the lack of uncertainty around rules and regulation created by the U.S Federal Government.  As the trend for legalization in many States continues to gain momentum, we can expect the US Federal Government to cave in and stop The War Against A Plant, especially since over 50% of the population thinks that marijuana use should be decriminalized.

Once the really big fund managers, who are still sitting on the sidelines, are given the green light to start investing in this sector, these early investors will benefit from the sectors growth and the share prices will rise from the additional buying pressure. Once that happens, the market caps will also rise to a point where the institutional fund managers will be in a position to start getting invested in the marijuana sector. 

At the moment, the institutional money can’t get invested in companies with a small market cap, their rules and guidelines don’t allow for speculative investments.  But as the market caps start to rise, we can expect these institutional fund managers will be paying a higher premium for the industry leaders in the MJ space. When they are given the green light to enter to space (most likely after legalization by the US federal government), we can expect to see a tremendous rise in share price from the additional buying from institutional money. The average person can profit from this strategy and trend knowing that the big money still hasn’t entered the sector yet. When that money starts to flow into the MJ sector, the early adopters should be rewarded by having the foresight to get invested early enough and riding it out until the do.

Finding the Right Private Placement Deal

They key to investing in the MJ space is to identify several different companies which standout above the rest, get invested early enough (especially now that many of the company’s stock price have corrected significantly) and then wait for the broker and institutional money to start aggressively buying the sector.

Accredited Investors in Canada and the United States have an amazing opportunity to get invested alongside some of the professionals who are early adaptors and visionaries; they see where the marijuana sector is heading and they are placing their bets on some potential leaders.

The trend for the MJ sector is already established and it is gaining momentum. Over the next year or two we can expect to see additional companies with great potential raise capital via private placements. As an accredited investor, you want to get positioned early enough in some of the best companies and ride the trend. Your strategy should be to identify the best MJ companies who are raising capital now, get invested and sell to the institutional money manager or the retail investor at the peak of the trend when excitement is at its maximum.

InvestInMJ has already identified several private placement opportunities for accredited investors to participate in and we are evaluating dozens more.  We only select the best opportunities with private and public companies looking for financing and share them with our audience.  If you qualify as an accredited investor and would like get more details on the best deals, you may want to view some current MJ private placement offerings and subscribe to our MJ Accredited Investor Newsletter.  

The opportunities and options for accredited investors to get involved in private placements is probably the best way to play the larger 3-5 year trend in the MJ space. However, the retail investor won’t have access to these deals, but they can also benefit from this trend and get invested at an early enough stage.  If you are new to investing in the MJ industry and are looking for a great place to start researching the companies and the sector, our site is a great portal of information and opportunities.