Video: Cannabis Investing, Stock Picks With C3 Fund's Josh Kincaid, Vice Ventures' Catharine Dockery

With cannabis legalization poised to happen on a federal level sooner than later and continued growth of the cannabis industry, marijuana stocks are making an impact within the sin-stock market. 

In the first three months of 2021, Illinois cannabis taxes exceeded liquor taxes for the first time, hitting $86,537,000 million. March cannabis sales amounted to $109,149,355, representing a month-over-month jump of more than $28 million.

Other sin-stock peers also recognized the opportunity within the cannabis sector. Tobacco giant British American Tobacco PLC BTI recently invested CA$221 million ($175.7 million) in OrganiGram Holdings Inc OGI, acquiring a 19.9% equity interest in the cannabis company.

Apart from money, tobacco companies like BAT are bringing the knowledge and experience of being a part of the sin-stock market to the cannabis space.

"What we've learned from alcohol and tobacco is that distribution channels are more important than anything," said Josh Kincaid, portfolio risk analyst at C3 Fund.

He was one of the guests in the Benzinga Cannabis Hour, co-hosted by Javier Hasse and Elliot Lane.

Partnerships with distributors should be about figuring out "how to reduce your shrinkage or your waste," as opposed to just looking at "how to get your product from point A to point B,” Kincaid explained.

Even though a number of companies within the sector have set themselves as "buyout targets for big pharma big tobacco, and big alcohol," it "all boils down to is that distribution channel to be able to get your product in front of enough consumers."

Kincaid thinks that beer maker Constellation Brands, Inc. STZ is "an interesting play" as it aims to gain leverage from both alcohol and the cannabis side.

He also sees an opportunity within the edibles as well as beverage sectors, as cannabis drinks are becoming more mainstream in the U.S.

Truss Beverage Co., a joint venture between brewer Molson Coors Beverage Co. TAP and HEXO Corp. HEXOHEXO, was the latest company within the space to launch a lineup of cannabis beverages.

Less Is More?

Kincaid praised HEXO's strategy, pointing out that it avoids making deals with all stock offerings, as opposed to companies like Canopy Growth Corporation WEED CGC. The Canadian cannabis giant recently announced its plans to acquire The Supreme Cannabis Company, Inc. FIRE SPRWF in a CA$435 million ($345.7 million) deal.

"All stock deals aren't really generating the revenue," he said. "They are a "result of too much money in the system."

In his opinion, these companies are not "doing enough due diligence to bring that valuation back down to reality."

On the other hand, companies like Innovative Industrial Properties, Inc. IIPR are providing "an immense amount of value." The cannabis real estate investment company will always have "hard assets" to fall back on once the hype is behind us.

"They have collateral that they can give," he added.

Invest In What You Believe

While many investors avoid putting money in vice stocks, sometimes on personal belief and others on account of investment firm statutes, Catharine Dockery, founder and G.P. of Vice Ventures, has no problem with them.

As a New York native, she is proud that Empire State became the 15th in the U.S. to legalize cannabis last month.

As an investor working in a company that focuses on brands, Dockery is "incredibly excited" about the cannabis brands that will come out of New York City.

"I have a thesis that brands are built here," she added.

Cannabis Legalization Is A Necessity

"We have the most progressive laws around cannabis, and I am a firm believer that legalization will reverse mass incarceration," Dockery said.

She is not opposed to paying higher taxes, as long as the money goes to "communities that were most negatively affected by the war on drugs," as well as public education and drug prevention.

Cannabis tax revenue is also one of the reasons why cannabis legalization is popular across the political spectrum, she added.

"If you're going to be conservative, and you see the money that's coming in from cannabis for these states it would be completely irresponsible not to pass it."

"There are aspects about it that would appeal to every single politician if they did their homework."

She thinks that federal legalization is a necessity since it can "save lives."

"If there was regulation about what went into a vaporizer there would have been no vitamin acetate killing Americans," Dockery concluded, talking about the vape crisis America went through prior to the COVID-19 pandemic.

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