Disclaimer: The below post is the Q1 2025 Investor Letter that I sent on April 23rd to investors in the Mindset Value Wellness Fund (Note: our funds had a big snapback rally into the end the month and ended April modestly down). This post is NOT a solicitation. I talk about stocks that I own and my view of the future. It is imperative that you do your own due diligence and not rely on anything written below. I’m posting this in order to show how my writing translates to actual performance. With that, I hope you enjoy and gain insights.
The Mindset Value Wellness Fund lost 13.7% during Q1 on a net basis. With the turmoil in the market from tariffs and other news, it is important to share that on an estimated basis, we are down another 14% so far in April as of the writing of this letter, and we estimate we are down 26% on a net basis for the year so far. (For comparison, the average cannabis stock is down over 40% so far this year.)
Mindset’s Cannabis Portfolio is Positioned Well for Uncertain Economic Times
If we are entering a time of heightened economic uncertainty and a possible recession due to tariffs, we believe that the companies we own are well-positioned for such an economic environment.
In cannabis, our largest positions are either low-cost producers such as Grown Rogue (OTC: GRUSF) and Glass House (OTC: GLASF) or they are consolidators with pristine balance sheets who are on the hunt for distressed companies such as Vireo (OTC: VREOF) or Mammoth Distribution (Private). For the low-cost producers, few if any can follow prices down and our companies gain market share while others go out of business. And for the consolidators, the more distress there is, the more opportunity there is to pick up companies and assets for pennies on the dollar.
Grown Rogue Is Growing Up
Driving some of our recent downside performance was Grown Rogue, which previously had been wildly outperforming other cannabis stocks. The stock sold off after their Q4 earnings confused some investors and, in an environment where most cannabis stocks are down 40-50% for the year, the reaction from some investors was to shoot first and ask questions later.
We think all of this was a big misunderstanding as to the long-term value of Grown Rogue and are still quite bullish. We took advantage of the selloff and bought more shares. You can read more about our thoughts about what happened and watch our interview with the CEO, Obie Strickler as well.
In summary, we continue to believe in Grown Rogue’s unit level economics and its business model. And I believe this model can be replicated in many new states for phenomenal ROIC for investors to enjoy.
Part of growing up is realizing that not all investors may understand your story. Sometimes quarters are noisy and there are a lot of moving parts that create confusion. And it’s important to tell your story and tell it in a way that investors will understand.
Luckily for investors, Grown Rogue is starting to flex its growth muscles and start to really grow, and there should be tangible evidence of this when they report Q1 in about a month. With the company poised to double its cash flow this year, the stock after its recent decline trades at about 4 times my estimate of EBITDA. The company, when it hosts its first conference call is about to get its awkward teenage braces off and the company’s growth should shine for all to see.
The Uncle Arnie’s and Hemp Beverage Freight Train
We recently went to Minneapolis for a hemp beverage summit, and we left blown away by how hemp beverages were everywhere, including at supermarkets. One manager told us hemp beverages were not only one of the highest margin products in the store, but that they have pallets delivered every week. And one company seems unstoppable: Uncle Arnie’s.
Uncle Arnie’s is our largest cannabis beverage investment across our funds. In the Mindset Value Wellness Fund, it is currently 10% of our fund. We believe that it is possible that Uncle Arnie’s is worth at least double what we have it marked at. With the success of the company and its current growth pace, I think that it is possible that sometime in 2026, this position may be worth more than ten times its current value or more than our entire fund is worth right now.
I’m taking a very conservative valuation approach and will not mark anything up until there is an observable event that proves the right valuation but suffice it to say that this is a hidden asset inside our fund right now. To learn more about what is driving Uncle Arnie’s, please reach out to us, so we can share more detailed information.
The fund’s total exposure to hemp beverages is over 14% and we are excited to see the growth in value of our investments in the next 12 to 18 months.
Glass House To Decide to Hemp or Not to Hemp
Glass House has come to an interesting crossroads. The company will soon determine whether to not only to expand their cannabis flower production, but also to expand into hemp flower production. Hemp flower, if it follows 2018 Farm Bill guidelines, is federally legal and can be shipped across state lines.
The whole potential of Glass House is that one day they may be able to ship product across state lines and utilize the full capacity of their Ferrari of greenhouses. I recently had the chance to interview the management team and talk to them about the future. We are staying laser focused to see what happens as it could be a major unlock in value for the company and shareholders.
Summary
Volatility will come and go, and we own small and microcap companies. It is not surprising that these stocks can and do move 20-30% in a short period of time. That said, our companies are well positioned and well-capitalized and selling value products at a time in which many consumers may trade down. They are the low-cost leaders. Our portfolio is growing, and our companies’ competitive advantages are growing as well. We cannot predict the short-term, but we remain very bullish about the future.
If you have any questions or comments, please feel free to reach out to me.
Sincerely,
Aaron M. Edelheit