The Cannabis Manifesto
Going All In On a Generational Opportunity
I’m excited to announce I’m launching the Mindset Value Cannabis Fund, a new fund that will invest solely in publicly traded cannabis companies that are focused on the U.S. cannabis market.
I will never forget bidding on foreclosed homes on the courthouse steps in Gwinnett County, Georgia and feeling like I was the only one in the investment world who saw the generational opportunity in the housing market. In 2011 and early 2012, I told everyone and anyone how ridiculous it was to be able to buy three-bedroom, 2 bath homes in safe suburban neighborhoods for $45,000.
The American Home, the company that I founded and ran, ended up buying 2,500 homes, growing ten times in 2012 alone. Home prices have never looked back from the bottom in 2012, and everything we are seeing today in the housing market is a direct result of the massive under supply of housing between 2009-2014.
And I’m here to tell you that investing in the cannabis industry in 2021 gives me the same intense feeling that I had in 2011 for the housing market. I see a capital constrained industry, that is being ignored by most investors, but especially institutional investors. I have written a manifesto to shout from the hilltops that investing in cannabis is one of the great opportunities I’ve ever come across.
Here is a snippet:
Imagine an opportunity to invest in a mythical $100 billion market on its way to $200 billion in which capital is scarce, institutional participation is tiny and where many publicly traded companies involved are not listed in any major index or traded on any major US exchange.
Now imagine that these publicly traded companies have defensible moats, strong management teams and possess ten years of growth and re-investment opportunities ahead.
Then imagine that this magical sector has crazy inefficiencies where similar companies trade at wildly different multiples for no apparent reason and where you can buy industry leading companies growing at over 50% while trading for single digit cash flow multiples with little if any leverage.
This is the reality of the US cannabis industry. Thanks to the conflict between state legality and Federal illegality, a US company that “touches the cannabis plant” cannot trade on any major US exchange and instead trades on secondary and tertiary Canadian exchanges. Add in concerns regarding custody issues from several major brokerages and prime brokers, and you are left with little institutional involvement (estimated at a measly 4%), no index involvement and thus a wonderful opportunity.
In hindsight though, I made a mistake when starting my housing company and buying homes. Yes, the housing market bottomed in 2012 and yes housing prices have been on a run for ten plus years since. My mistake though, was that I shouldn’t have started my own company and then bought homes, I should have invested in almost every housing related stock, like Lennar (NYSE: LEN), DR Horton (NYSE: DHI), Home Depot (NYSE: HD), Sherwin Williams (NYSE: SHW). It would have been infinitely easier and provided far superior returns. And it would have played to my personal strength, being an investor as opposed to my inexperience as an operator. And that is why, I’m launching the Mindset Value Cannabis Fund.
Also, I’m excited to announce that I am partnering with Doug Brien, another pioneer in the single-family rental space and former CEO of Starwood Waypoint (NYSE: SWAY), which was sold to Colony Capital. Doug is now the CEO of Mynd, a next generation property manager that is very close to unicorn status.
Doug and I will never forget the day that Colony and Blackstone (through Invitation Homes) showed up at the foreclosure auctions and home prices went up 50% to 100% overnight. When US cannabis companies can trade on US exchanges, you can expect something similar or greater. But cannabis is not just a trade for revaluation. Again, the single-family rental market is a great comparison. Prices and housing activity kept going far after 2012 and 2013. Consider that just this summer in 2021, Invesco gave Doug and his Mynd team $5 billion to buy single-family rentals, ten years after the bottom for what many institutional investors told me was just a “trade.” Doug and I both believe that cannabis is an opportunity that could easily run for a decade.
There is one more point I would like to make. After spending over two years researching cannabis, I have come to believe that almost all of the negative critiques of cannabis are based on myths, misunderstandings and lies built upon decades of racism. I would not be launching this fund if I did not believe that cannabis was a big positive for personal well-being, society and our economy.
Please click on the link below for my full Cannabis Manifesto:
Disclaimer: Aaron Edelheit is the Managing Member of Mindset Capital LLC (“Mindset”), an exempt reporting adviser in the State of California. This post is not an offer to sell securities of any investment fund or a solicitation of offers to buy any such securities. The information in this post is for informational purposes only and should not be construed as investment advice. Mindset makes no representation as to the accuracy or completeness of any information shared in this post. Any past performance discussed in this post, if any, is not indicative of future results. The views and opinions expressed in this post are current as of 10/14/21 and are subject to change. Mindset has no obligation to update, modify, or remove this post or to otherwise notify a reader thereof in the event that any matter stated in post, or any opinion, projection, forecast or estimate set forth herein, changes or subsequently becomes inaccurate.