A Continued Look At Marijuana Stocks With Alan Brochstein

Last week, Benzinga sat down with Alan Brochstein of the

newsletter. He has been one of the first analysts to cover the sector in-depth and offered his valuable outlook on the budding industry. Brochstein will not be out there shorting

and the beverage companies, or anticipating the country turning into a “bunch of stoners.” “The whole space has a market cap of between $12-14 billion, all these public companies added up. In the scheme of things, that's not a lot. Just one beverage company would be $30-40 billion -- and that company has a lot of profits.” His thesis remains that current users will now be able to acquire cannabis through “legal” channels. Benzinga asked how the change in this dynamic will affect the fundamentals of cannabis, specifically, the economics of “supply and demand.” He also gave his take on the dynamic of “public" versus “private” investment and whether or not a new sector for the U.S. economy is emerging. “A lot of people see what's going on and think there's going to be more demand because its legal. There's a demand for

marijuana [compared to black market marijuana]. There's companies out there that can help people be more productive in growing, and so you're seeing the build-out that's going to happen. Legal recreational marijuana creates the need for high-quality marijuana at an affordable, competitive price. "On the black market, they didn't care about being efficient...It's not just about more people getting high.”

Benzinga asked what investors should look for if they desire to invest in the sector. Brochstein says try to identify companies that are doing the “right thing.” In his view, “Everybody knows these stocks are expensive, there's no way you can make the case. But nobody knows the future.” One such example is

. “MCIG started off with a $10 vape pen. They almost envision themselves as being the Apple of the industry. CEO and founder Paul Rosenberg [is] strictly a businessman, he owns about half the stock. He then brought on some talent and gave them his stock to help the company. Why? Because he knows the stock is overvalued, but if you can [evolve a company] without diluting your shareholders, that's what I mean by doing the right thing.” One final tip from Brochstein for potential investors is to read the filings. He emphasizes the “Three Ps: People, pecuniary, the plan. Does company have right capital structure? Or money to execute their plan? These are venture capital people -- these are not mature companies. You need forward-looking people that can adapt to change and that are shareholder friendly.”