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Master Class In Cannabis Investing, Part 2 (Podcast Transcript)

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Editors’ Note: This is the transcript version of the podcast we posted Wednesday. Please note that due to time and audio constraints, transcription may not be perfect. We encourage you to listen to the podcast, embedded below, if you need any clarification. We hope you enjoy!

Listen on the go! Subscribe to The Cannabis Investing Podcast on Apple Podcasts, Google Podcasts, Spotify, and Stitcher.

Rena Sherbill: Hello, everybody. Welcome back to the show. Happy Holidays, Happy winter, happy almost 2021. These are hopefully happier times than the rest of the year has been. I hope everyone listening is able to find a way to enjoy their holiday season. And I am so excited to bring you this episode.

It’s part two of our Cannabis Investing Masterclass with two stalwart Seeking Alpha authors, James V. Baker and Julian Lin. James V. Baker is a long-time investor. He had his own mutual fund, was a banker, done a lot of work in the investment community and in the financial industry. He has so much wealth and insight to draw from. But not only that, he is really passionate about making the cannabis industry better for investors, better for shareholders. He’s been an activist shareholder for Liberty Health (OTCQX:LHSIF) in particular. We’ve talked about it a bit on the show before. He has a Facebook group. And Liberty Health just did a deal with Ayr Strategies (OTCQX:AYRWF) yesterday.

So look what can happen if you are a passionate and compelling activist investor like James. He’s just done — I think, you know, he says on the show today, hey, I was just talking to Ayr Strategies. And I said if you guys have the money, you should buy Liberty Health. Guess what, they did? Just super excited to have him as a part of the Seeking Alpha community, have him be on the show for the second time, and have him share his wealth with us.

Julian Lin, who is newer to the investing world, but certainly not short on insight or knowledge. Julian and James really the perfect duo to talk about cannabis investing, coming at it from some different viewpoints.

They do agree about Canada though. We get into their famous controversy, issuing debt versus selling stock; what should companies be doing? We get into the U.S. space, the U.S. MSO space, we get into the ETF space, why MSOS looks so compelling. James talks about his recent conversation he had with Dan Ahrens who is the Portfolio Manager for MSOS and who we had on the show about a month ago.

Just lots of great content here if you are investing in the cannabis space, or if you want to be investing in the cannabis space, or if somebody told you they just made a bunch of money in the cannabis space, and you should really check it out, which is what I am telling everybody that I know, there are some great deals to be had. It’s an exciting time to be an investor.

We get into stocks like GrowGeneration (NASDAQ:GRWG), which is a bit of an ancillary play, we get into the REIT space, which Julian covers in his marketplace service and on Seeking Alpha. We get into IIPR of course. They have a bit of a disagreement on that REIT. And it’s a very interesting conversation. And I hope you guys enjoy it as much as I had, been a part of it. I hope you find it as entertaining as I did, and really excited to bring you this content, again happy holidays.

Before we begin a brief disclaimer, nothing on this podcast should be taken as investment advice of any sort. I’m long Trulieve, Khiron and Isracann BioSciences. You can subscribe to us on Libsyn, Apple Podcast, Spotify, Google Play and Stitcher. And we’d really appreciate you leaving us a review on Apple Podcast so other investors can find our show.

James and Julian, welcome back to part two of the Master Class in Cannabis Investing. Really great to have you both back on the show. Thanks for coming back on.

Julian Lin: Great to be here. Rena.

James Baker: Yeah, thanks for having us on.

RS: So one of the things that we touched on last time was the MSO picture in the United States, which obviously, recent developments, people are even more bullish than a few months ago, I think partly because of policies, partly because share prices are doing so well, partly because the stronger companies are starting to move to the forefront of the industry. But not all is a panacea. I’m wondering where you both are at in terms of your vision of the United States cannabis picture right now. Julian, if you want to start?

JL: Sure. I think it’s important. The 2020 election definitely is a good starting point for discussion. Just it seems — I mean, there’s still the January runoff, but it seems likely that there’s going to be a split Congress. And I think that prior to the 2020 election, there was a lot of hope for a blue sweep, which would have obviously been very, very optimistic for the cannabis sector.

However, I think the loop has — and the Congress can also be positive. However, that’s for the — perhaps that’s for the momentum investors and more for the long-term investors, just because I think the big four benefit largely by being able to position themselves during a gridlock period, whereas perhaps if there was a blue sweep, we would have seen all the stock prices go up all of the — it would have been a quicker payoff, but a smaller payoff then in the long run.

RS: Yeah. And what do you think about like the stocks where they’re at specifically right now?

JL: So I think, if one were to compare them to maybe one year ago, two years ago, you might see 100% or maybe even 400% returns. But I think that would be a mistake, because I think when a stock starts very cheap, when it goes up it might still be cheaper. I tend not to value the stock based on the previous price movement. So honestly, I think the stocks are actually still cheap.

If you were to for example, look at Trulieve (OTCQX:TCNNF) or any of the big MSOs and kind of back out the 280E income taxes, it’s surprising that they’re still trading around 30, 40 times earnings, which is actually insane when you consider they just grew their top line by triple digits. So you’re not really going to see that kind of value and growth combination anywhere in the market, especially this market.

RS: Yeah, James, do you want to give us your thoughts on the state of the U.S. picture right now?

JB: Yeah, I think we’re just in the first inning of this ballgame. I think it’s just beginning. And it’s just going to take off. And I think that the — I was talking to Dan Ahrens of AdvisorShares the MSOS. I said, well, the timing on that is unbelievable. In just two months, that’s gone from basically $5 million funding to $165 million. And I actually think within six months, it could be $1 billion, or certainly within a year. I mean, if the Harvest MJ, which has all the Canadian stuff in it can be at $1 billion, this ought to be at $1 billion. This fun — their MSOS they have hit the sweet spot on this one.

And so I think that’s going to be a big, big driver. And I’m going to — we’re so early in this game. Now the article I just published on Seeking Alpha, if you added up the top 21 companies in the United States, the total market capitalization of those 21 companies is $25.4 billion. That is all, that’s nothing. That is chump change to the hedge funds and the private equity guys. I mean, if Ray Dalio or BlackRock, or somebody says, put 1% of our assets and I want 1% of our assets in cannabis, in the marijuana business, 1% of a trillion is — that’s $10 billion, $10 billion. Now they own half of the industry.

So this industry, I’m looking for the next five years. I’m looking at a 10 bagger, five years from now it’s a 10 bagger. Longer than that I think it could be 100 bagger, a 100 bagger. I just looked at the valuations this morning. And a lot of them don’t make sense. But they’re — it’s just in the early stages. When you look at the P/E multiples, they don’t make any sense at all, forget about those. And you look at book value, or you look at some other things, any way you want to measure it, it’s got a long way to go. We are early in this game.

And I actually believe — I mean the passage of the MORE Act in the House, I mean, the fact that Kamala Harris was the sponsor of that in the Senate, if I don’t know what the election is going to hold, but if those two seats in Georgia go Democratic, watch out. You better not be short any of these stocks, because you’re going to go straight to the poorhouse. You won’t even stop to pick up a dime, you’ll be gone.

Because — now it’s just a matter of time. And I don’t think the Republicans are going to band together as a block to prevent the marijuana deal. Some of those guys are from states that are really want marijuana there? So they’re not going to kowtow. So I’m — I tell you, I am optimistic, and the boat is loaded, the boat is loaded.

RS: So I would say the same thing. And we were mentioning — we were talking about before we started recording, and I was saying every day, I wish I had more money to invest in cannabis stocks. I think the excitement is palpable. And I think the reasons are clear to people who are paying attention for reasons that you both mentioned, but also something that comes up when discussing the U.S. market in particular, is because we’re in the early stages, and because we’re just building out this sector, I think investors are concerned, certainly some are concerned, will — the places where they have their money parked right now, if we’re talking about the Trulieves and Cresco’s (OTCQX:CRLBF) and the Green Thumbs (OTCQX:GTBIF) and the leaders of the industry in the States, will those be the winners long-term?

Like, is it worth parking so much of your money in these shares? And how much is long-term like, what would you guys both say to that when people say, well we’re concerned that in a few years, sure Trulieve looks great now, Cresco looks great, or Green Thumb looks great, but in a few years, a CPG company is going to come in or a pharma company or an alcohol company, and they’re just going to take all the kind of profits. What would you say to that?

JB: Won’t happen. Well, these other guys coming in taking over, I think it’s going to be a state by state deal. And they can’t do the thing that — it’s not going to be like McDonald’s worldwide. Florida is going to be its own seed to sale deal. And you’re not going to bring cannabis in here from other states, you’re not going to be bringing cannabis in here from Canada. So in the dispersion of valuations now, I own a bunch of Trulieve, but I own a bunch of Liberty Health. And they are two, they are polar opposites. Trulieve is selling at nine times book value and Liberty Health is selling at 90% of book value.

Now I think they’re undervalued situations and Liberty Hill stands out. You’ve read my article, I wrote that article, I start writing it, I said, what are you doing? I finally finished the article. I said, what have you done? What have you written here? I felt like, I was a painter, what have you done? I finished the article. And he says, what are you going to write for the conclusion. I had no clue what I had done? I had to read what I had written, because I was inspired to write them. It was just pouring out of me.

And when I looked at it, I said, my God, look at this, look at these valuations. And when I added it up, by far the most undervalued stock in the whole damn universe was Liberty Health Sciences. And at the same time, Trulieve offered great value. So we’re early, but when I look at these numbers now, I look right now here, I just ran the numbers for the last quarter. And they range from a percentage of book value, 90% for Liberty Health, 15 times book value for GrowGeneration, which isn’t in the business but is in the business. And they own the world and they are a Wall Street darling. And you look at them — GrowGeneration is now — this gives you an idea of where this could go. Because it’s one of the few stocks that that institutions could own, Rena. And it is selling right now at 126 times earnings.

It is not surprising that they just issued 5 million shares at $30. You know what, 5 million shares at $30, you know what that does, that doubles their amount of capital that they have. They have equity capital today before they raise the money. They’ve just doubled their capital structure. What are they going to do with that money? Well, I have no idea. But they decided probably a good idea to sell some equity at 126 times book value.

Now these other guys, they’re issuing debt and they should issue debt. And I’m still upset with Trulieve that they sold stock instead of issuing debt. Damn, it made me mad.

RS: Well, this is something that we got into last time in part one. This is the big controversy between you and Julian.

JB: Absolutely. It’s a controversy… it’s beyond that. Julian wrote an article after — Julian wrote an article after Trulieve did that and I widely condemned Trulieve everywhere I could print it. And I sent it to their Board of Directors. And Julian wrote an article saying that was a wise thing to do. And Julian, I want to tell you, you made a star of yourself in that Board Room in Tallahassee. They like that, but the shareholders sure as hell didn’t, because the price of that stock plummeted 15% overnight. The fans of that offering were Canaccord Genuity that made the offering, the Board of Directors that did it. And that’s it, they’re no more fans.

RS: Well Julian, what would you say to that?

JL: Well, I mean, I think there’s no disagreement that Canaccord Genuity is going to be the biggest winner of that. I think I could agree that. If these MSOs were to just issue debt, I think that would be the most accretive to the bottom line. But I think you got to also consider kind of holistically beyond just the biggest bottom line, because you could also create share value, shareholder value beyond just growing the bottom line growth, also through multiple expansion. And I think that by creating a safer balance sheet that could pave the way for all these MSOs to seek higher valuations.

And the best indication of that is going to be Canopy Growth (NYSE:CGC). And in Canada, a lot of those stocks, they’re all publicly traded in the U.S. stock exchanges. So they don’t have the same issue as the U.S. MSOs, but there’s definitely a big premium on Canopy Growth. And their results are not really better than Aurora (NYSE:ACB) or Aphria (NASDAQ:APHA) in terms of profitability. They all kind of doubled cash.

And Canopy might even arguably has the most cash, but they trade at the biggest valuation. I think it’s because of their balance sheet. I think it’s because investors view it as the least downside, if there was some kind of downtime market scenario. They’re not going to go bankrupt or have to issue stock, at least with this kind of balance sheet.

So I think that the U.S. MSOs if they were all to have more cash on the balance sheet that would help I think, even if as James says it would be not as accretive to the bottom line as issuing debt.

JB: That’s just comparing — comparing Canada to anything is a big mistake. Those boys up there screwed it up so bad. From the peak those stocks up there that had all that equity, all that stuff, they fell from $88 billion market cap, they fell to $16 billion. They fell 90%. And Canopy was right with them. Canopy is a disaster. It’s been an embarrassment for the Sam brothers’ Constellation Brands (NYSE:STZ), that it’s just awful. I don’t even want to talk about Canada.

Let’s talk about the MSO space, to hell with Canada. Let’s talk about America because that’s where the future is. Let’s talk about the American — the companies that are doing business here.

RS: Well, let me interject one second. Because some would say your friend and my friend, our friend Alan Brochstein would say that there are things to like about Canada, maybe not in the LPs? I would say — I would agree with you that there’s not much to like in Canopy Growth, and I wonder when the valuations balances itself out in in contrast to its balance sheet, which I agree with Julian is probably the reason for the valuation. But I would also question, something like Aphria or the smaller players, Valens (OTCQX:VLNCF) for instance, there are some players that might be in better able to capitalize on the international market, and also when the demand and supply kind of balance itself out.

JB: Rena, I just took a look at it. On the CSE, there’s 205 life science companies listed. Good luck picking the winner. Good luck. I’ll bet you, those 205, most of them are the reincarnation of dead mining companies and dead uranium companies. They’re just dead. And I want to stay on this point with Julian.

I want to convince him that by god, if it was — if equity is what drove a stock in a debt-free environment, then how in hell is Liberty Health selling at 90% of book value when it has virtually no debt? The total amount of debt it has is $4 million. Explain that to me, Julian. Explain it, here’s a company that has no debt and it is selling at less than book value. How does that correlate with your analysis?

JL: Well, I think of course, it’s not like a one size fit all, it’s going to always work. But I think that — I think that in the case of Liberty Health, there might be specific issues there. And in particular, I mean it’s not a bad company. But I think few would argue that they’re not executing as well as Trulieve might be. If I recall, they seem to have some sales issues over the past couple of months. I think that this is a new industry. So it’s not like every single company is going to be executing perfectly. So I think there’s definitely going to be a lot of the smaller players are still kind of growing and still learning the ropes a bit.

JB: I wish you could just get off — of a deal about the debt equity, because I mean it is– it just doesn’t work. It’s just not correlated like you think it is. And debt, I just did — did you just — have you read the article I just wrote for Seeking Alpha on financial leverage?

JL: Yes, of course.

JB: Now that would tell you that based on debt-to-equity, that would tell you a Curaleaf (OTCPK:CURLF) is the worst, because its debt is 445% of its tangible equity. And yet, it’s doing well in the stock market. The future is just so bright in the United States. And these companies — we’re just so early in this game. Unbelievable.

JL: So if I can add here. So yeah, it’s true that Curaleaf, they have a lot of debt compared to the other big three but they still trade at a premium. I would argue that they trade at a premium in spite of their balance sheet, definitely not because of their balance sheet. I think that their exposure in several markets provides a diversification there. I think a lot of investors are seeing it as a safer bet. Because I think Rena’s question earlier was, are we certain that these current MSOs or these current American companies are going to be the big winners? And perhaps CPG players might come in. I think this is — I can answer that that’s a good parlay here.

If we look into Canada, the CPG companies didn’t really make an entrance there or not to the detriment of shareholders, at least. They did, but the shareholders benefited because the only way the CPG companies enter was by making a big acquisition. So I think that if we were to look at the legalized Canadian market as an example, I don’t think American investors should be worried about CPG companies coming in fact, I mean, it might be a payoff if they come and buy your stock.

On the other hand, I think the biggest risk in America is not CPG companies, but government regulation. For example, I think Trulieve is doing great right now. I’m not saying anything bad is going to happen, but they’re only in Florida. So what if —

JB: They’re not just in Florida.

JL: Well, 90 — 95 — I mean. Okay, you’re right. So they’re an MSO but 90% of the revenues are in Florida. Okay. Right. We could agree on that. So what if — for example — in the recreational Florida market, and I think that’s what happened, but what if all of a sudden Florida says the medical dispensaries are not allowed to sell recreational cannabis? I mean, they will be nuts. But what if they did? That would be horrible for Trulieve stock, and they would only be in one market?

So I think that if investors wanted to protect against some sort of dis-regulation issues, that they got to diversify across several players, but also besides that, they could choose players who are diversified across more states. Because when you’re diversified across more states, you run less the risk that individual states would kind of screw you over so to speak.

RS: So for that reason, you would prefer something like Curaleaf to Trulieve for your liking?

JL: Well, I still like the balance sheet, and I still had on the balance sheet. So Curaleaf, I think I like their diversification compared to Trulieve, but I would say a name like Green Thumb might be even better, because Green Thumb, they’re very profitable. I would say they’re slightly less profitable than Trulieve, but they have significantly more diversification in terms of states.

So I think it will give you a better balance between profitability and diversification. And because we were spending so much time on the balance sheet issue, I still think that a stronger balance sheet will lead to multiple expansion. And it’s not just in the cannabis space, if we were to look at actually every other sector, you look at big tech, you look at Facebook (NASDAQ:FB), Alphabet (NASDAQ:GOOG), they’re being rewarded by strong valuations, because they have a lot in their cash on the balance sheet.

You look at — I covered the REIT space, the Real Estate Investment Trust space a lot. This is a space that that I think would illustrate this very clearly. In the low interest rate environment, it would obviously make a lot of sense to issue debt at like 2%, and buy real estate assets at a 6% 7% cap rate. Again I’m kind of focusing on the net lease rates, but that’s not really what they do.

When you look at a company like Realty Income (NYSE:O), that’s one of the most popular dividend stocks maybe ever. They don’t just issue debt to buy stock or to buy the assets. And there’s an important — even though they could maybe, they have an A, credit balance, A credit rating, their leverage is not too high. They could issue debt to buy the assets, but they don’t.

In 2019, they basically only issued stock to buy real estate assets. Why did they do that? They did that because there’s an important synergy there where if you bring your leverage lower, if you improve your balance sheet, while driving the bottom line growth, your stock price goes higher, your valuation goes higher and then you can issue more stock to kind of buy more assets.

So it’s a self-fulfilling prophecy where if you care about your balance sheet, then your valuation goes higher. You can issue more stock and you could grow faster. So it’s true that they could have been more accretive to the bottom line by issuing debt, but they would not have been as big a company as they are now if they didn’t have access to issue stock, if that makes sense.

RS: James, I’m going to — I’m going to let you answer here because I know you want to.

JB: We’re going down the wormhole here. Would you please get — let’s get off of talking about REIT — if you want to talk about an REIT, let’s talk about Innovative Industrial Properties, which dominates the cannabis space, and is an REIT and is the primary source of funds for a bunch of companies and a bunch of companies that are using them. So and if you — if you look at these things, I mean it — per share data, if you look at — I mean, you see Tesla (NASDAQ:TSLA), Apple (NASDAQ:AAPL), 25 times EBITDA. Trulieve, 13 times EBITDA, revenue Trulieve, 6 times revenue, the share price, 6 times revenue. Tesla, 22 times revenue.

When you look at stocks, and I want you to imagine, one of the reasons why Tesla has such high valuation is that it was kind of the only game in town, if you wanted to play the ESG deal. That was the big thing, up until recently, it was the only entity. So people wanted a piece of it. And so you can drive those valuations to the moon. And so you end up with Tesla has a P/E ratio now of 1,234. It has a free cash flow ratio, 334 times. These are numbers that are beyond imagination, but there are numbers that are going to come into play in the cannabis space.

I promise that we don’t even fathom what it is. I’ll give you an example. We know for a fact that when a state goes from medical to rec, we know based on other states that have done it, we know — that’s just what happens. That’s in a normal state. That’s a normal state. Florida is not a normal state.

Now you may be paranoid about not — the government here going to take over all the companies in the state and kick them out or something. That isn’t going to happen in Florida. Rec is going to come in here in 2022. When it does, we get 130 million visitors a year, visitors, we get 20 million snowbirds that reside here during the winter, in addition to our 21 million population.

Now would you rather be here or in Maine? Well, here. I’ll give you another deal where valuations are. This is the best example I can make. Trulieve bought a cultivator in McKeesport, Pennsylvania, which is 7 miles from where I was born and raised. It is the graphite capital of the world. If you grow tomatoes there, you will get graphite in your teeth, because it’s steel mills from the front to the back. They bought a 30,000 square foot cultivation facility. And they bought three dispensaries that were unrelated. They spent up to $140 million.

I want you to do the comparables. They spent $140 million on through — a 30,000 square foot cultivation facility and three dispensaries in Pennsylvania. Now here in Florida we’ve got Liberty Health Sciences, that’s got 28 dispensaries. 190,000 square feet of grow cultivation facilities. Now — and no debt — now — and it’s selling — its market cap is $130 million.

How’s that possible? How can a 30,000 square foot facility in Pennsylvania with three dispensaries be worth $140 million? That market isn’t as vibrant as Florida. It’s not even close. Born and raised there. And that’s $140 million. This is $130 million. I’m not saying Trulieve should have bought Liberty, no, it can’t. But I’m just telling you, sometimes valuations just get way the hell out of whack. They get way out of whack.

Now Verano is trying to do a deal with AltMed. Whether that goes through or not, I don’t know. AltMed yet — AltMed by the way had exactly about the same amount of grow facilities, 200,000 grow facilities. And about the same number of dispensaries, 26. And I think the valuation that Verano put on AltMed was about $800 million.

So that’s seven times Liberty Health valuation. So I say this is crazy. Now how is this possible? It’s possible because the level of knowledge in the cannabis space is not near where it needs to be. Now I hope that my articles shed light on that vein. That’s what my articles, 32 articles are all about, shedding light on that, trying to inform — trying to help these people. They need to know.

RS: I think your articles do shed a lot of light on this. And I think that’s what we’re trying to do now. Julian, I’m going to give you the final word on this topic and then I want to move on to some other topics. But do you have one last thing to say there?

JL: Well, I mean, I’m not so familiar with the Liberty Health situation. But I definitely agree that, especially in a space where for U.S. investors, the only way they could access the stocks are going to be on the over-the-counter market. There’s not going to be a whole lot of coverage. In fact, none of the banks are really covering the cannabis space yet just because it’s still a criminal drug on the national level. So I think that there’s going to be a lot of stocks that are either too high and a lot of stocks that might be too low perhaps. Perhaps Liberty Health is one example of some valuation issues there.

I think that makes sense. There’s going to be a lot of potential for an efficient market in the cannabis space.

RS: And speaking of Liberty Health, James, do you want to tell listeners — I mentioned this earlier on the podcast, about the work you’re doing as an activist shareholder with Liberty Health. You want to talk to listeners about what you’re trying to do there?

JB: Yes, about — after I finished that article, when I said I did that analysis and I concluded, I said, gee whiz, it’s the cheapest stock by far. It’s so undervalued, it’s amazing, what is going on. And I own some of the stock. I own more of it now. The — and so I started looking into it and I found just hundreds of unhappy displeased, disgruntled, downtrodden, beaten up shareholders that have been holding on to this stock for years, and just voiceless people, just being run over. And I said, by God, I want to do something about that.

So I decided five weeks ago to start organizing them. And I formed the United — United Liberty Shareholders Group. And in five weeks, I have assembled hundreds of shareholders from all over the world. They’re from all over the world, China, Croatia, Israel everywhere.

And the one thing they all share, outside of being unhappy, they’ve all held their shares for a long time, and they are all unbelievably optimistic about their future, as they should be, because this is Florida. And that’s all this company has. It has Florida. It has the grow facilities. This was a company — I’ll say one nice thing about Canada.

They had in here — Aphria started this deal. It was an Aphria company. And they had their A team in here. They had Vic Newfield, they had George Scorsis, they had Rene Gulliver, they had John Cervini, they had Calcavecchia. They had the people who had dirt under their nails, that had been born since they were kids, grow and stuff in the fields of Leamington, Ontario. And they had the diamond boys down here running this deal.

And — but in 2018, they had to — they wanted to uplist to the New York NASDAQ and to do that they had to get rid of their ownership in Liberty Health. So when they did that, the A team left, all of those — all that talent. Rene Gulliver does fine, the Chief Financial Officers existed in the space, no mysteries, a gifted guy. George Scorsis a real — the people loved him, he’s a fan. He was the CEO. Vic Newfield, a hell of a guy — I mean, all these guys were the A team. They all left, all of them.

The people in the grow area, they all left. So it was left to other owners, other owners that have not been great stewards that we’re trying to help them become better stewards. And our interests and their interest must be the same. By God, they just got to grow the stuff, process it, sell it, because this is a bird’s nest on the ground. This is — there is no better market. I’ll give you another country you can have the other country, I’ll take Florida, a limited license state. So, we’re incredibly optimistic. As I said, within five weeks, 10s of millions of shares, control now there’s not a seller in the group. We’re net buyers of stuff. Everyone in the group is a net buyer.

I just happen to put it together to breathe life into these people to give them faith to give them hope. They see Liberty Health like I see. They see a diamond in the rough. I wrote the first article about this company. And I wrote it, it’s a hidden gem. And I believe that at the time, then I had a falling out with them. And then recently they’ve had some major problems. I mean, the CEO they made him fall on his sword. Some might say that they chopped off his head and put him on a platter and offered it to me in my group, as kind of like Genghis Khan or some of it, our group is not about getting anyone fired.

RS: So what’s the goal? So what’s the goal?

JB: The goal is to make this sucker produce. Right now it’s operating at 27% of capacity. Its quarter that they just finished was a disaster. Why? They had people are speculating to hell with speculation. They had mold. They had a mold issue, they lost a crop. Now if you want to know what’s going to happen to a company, a member of our group want to know as valuable member of our group as a janitor up there. Talk to janitors, they know what the hell’s going on.

If you want to know of a bank, by the way, a little side there, if you want to know if a bank is going to fail that weekend, watch if the secretaries are bringing out their plans. That means it’s not likely to open on Monday.

RS: So where do you see it going forward for Liberty Health? Are you optimistic at what you’re able to bring that?

JB: If this sucker just doesn’t — if it’s not 3 bucks in two years, I’ll be shocked. If it’s not $1 in one year, I’ll be stunned, bucking ahead. I see it five years from now, I see it — pick a number 10 bucks, 10 years from now 35 bucks. It’s now at $0.39.

Now, I’ve got to be honest with you, I own a bunch of that. I buy it all the time. I own a bunch of Trulieve too. So I put my money where my mouth is. And I don’t do it blindly. The — I’m incredibly optimistic. People, private equity groups have contacted me already. They said, Doctor, you’re assembling all those shares. We’ve been looking at that. And oh, I see you have, you been looking here. Yes. We’re thinking about maybe taking the position there? Well, you can go into the market and keep buying the shares. But it’s going to take you months to accumulate as many shares as we already control.

Now, what you might want to do is just, and I’ve talked to our group. And then you can go in there, your private equity, you’ve got an army of — army of talents, you’ve got an army of lawyers. There, we’ll turn over our shares to you, you go in there and you make the changes. We don’t want to take control pal, we don’t want to take control. We just want this sucker to start doing what it can do.

It can never be a Trulieve. Trulieve’s got 1,900,000 square acres and five sites. And they got three guys up there Hackney, the Shears and May, that cut their teeth on growing stuff, they know. But Liberty just hired a new Vice President in-charge of operations and gave him some equity options. And I told the guy I said, do your job, son, and you’re going to be very, very wealthy. And I told the janitor too. I said you don’t own a lot of shares, but it doesn’t matter. There’ll be some money coming your way. I promise you when this deal gets done. So…

RS: I think what’s nice about the cannabis industry is it’s nice to hear to — from activist investors and what you can do to kind of help shape the path of where a company’s going. It’s very interesting, I think. Speaking of valuation, and we were talking about GrowGeneration, it’s certainly a darling of institutional investors, because it trades on a different exchange than many cannabis companies do.

Julian, you’ve written about GrowGeneration, talking about how it’s overvalued. What’s your — is that still your sentiment on the stock? I mean, it might be getting more overvalued by the day, I guess.

JL: Yes. And I was careful to not say too short to stop. I think GrowGeneration is definitely an interesting pick. I think perhaps something about me is just not resonating with the story. I mean — so the general bullish story is going to be that, this is like, I call it the Home Depot (NYSE:HD) of cannabis. I think that’s what Wall Street’s viewing it as it’s going to be owning a lot of these hydroponic stores that sell a lot of equipment to cannabis players. But the question that really bugs me is, it’s not like, I mean, it’s clear, this is a very growing industry. It’s a very promising outlook.

But GrowGeneration’s primary growth levers seems to be external acquisitions, seems to be acquiring a lot more stores across the nation, and that — when you read their investor presentation, they really want you to believe that I mean their story is that they want you to believe that they’re going to be the number one market share across the nation. But the only way they could do that is kind of by buying out stores across the nation.

And the big question I got to ask is, when there’s a sale, there’s always a buyer and there’s a seller. So why would this individual small mom and pop hydroponic stores be willing to sell to GrowGeneration. And these are very low multiples that are selling at to the company. So what — why are they selling at such low multiples? That doesn’t really quite make sense to me when you consider that they supposedly could be making so much money on their own.

So that — and then not to mention that GrowGeneration’s also pretty pricey even right now, even when you consider future growth. So I mean, maybe it’s just a flaw in my idea for my investment philosophy, but for some reason, I’m just not able to get on-board that GrowGeneration bullish thesis.

RS: So you also mentioned that you’re covering the REITs. And on Seeking Alpha, you’ve covered a few REITs. What’s your thought about the cannabis read space? Or are you looking at that? And what are your thoughts there, especially compared to kind of the broader REIT sector?

JL: Absolutely. So I guess the main one is going to be Innovative Logistics Properties. And kind of not to beat a dead horse. But on our discussion before about issuing debt or equity, I’ll mention that IIPR has been a voracious seller of its own stock, and it’s benefited them tremendously. They’ve — the higher their stock grows, the cheaper the cost of capital, they sell their stock, and they buy these properties at 50% cap rates. It’s great.

However, I hesitated to invest in IIPR, mainly because it seems that — I mean, there’s a couple of potential issues. They’re definitely betting — benefitting by the fact that cannabis is a criminal drug. So it means that even a company as strong as Trulieve — sorry, even a company as strong as Trulieve, they have to get unsecured debt, like a 9.75% interest rate, or they’re willing to ensure a sale and leaseback transaction with IIPR at a 13% cap rate.

I mean, when you think about how profitable these companies would be, without the 280E tax, there’s no way that they would accept those terms in a decriminalized environment. So — and that creates an issue, because what happens when the nation decriminalizes cannabis, and all of these properties come up for renewal, like all of the IIPR sale, leaseback they come up for renewal, I find that highly unlikely they’re going to renew at the same rents. Especially, maybe there will be other properties they could just kind of move their operations to.

I think it’s very reasonable to assume that at the very minimum, I mean, when you look at the net lease space, I mentioned Realty Income before, they’re acquiring properties at the 6% cap rate. And if you look at other players like STORE Capital (NYSE:STOR), they’re acquiring these properties at 7.8%. That’s still 50% lower than the 13%, 15% cap rate that IIPR is acquiring stuff that.

So it seems reasonable to assume that when these leases expire, they might renew at 50%, that’s fine. I mean, that’s not, I wouldn’t — I would say that’s not out of the world to assume. And so that’s going to be the main fundamental idea I have for the IIPR.

The other one is, I mean, I can’t prove it. And there’s — there was the short report. You don’t know, kind of like, are these arm’s length deals, you don’t know? Is this property really worth $100 million, or whatever that IIPR gave the other companies, right? Because at the end of the day, these net — these players, they should be considered real estate banks. They’re basically giving debt to a company, right? They’re giving you a lot of capital, and you’re signing like a 10, 15-year deal.

So you really have to wonder — at the end of — but the difference between these net lease REITs and the bank is that you’re not getting your principal back as a shareholder, right You’re signing a 15% cap rate, but you’re not getting your — there’s no debt maturity. So I think that — I still need to see a couple of years maybe, I want to see how they deal with lease renewals. Are they really going to get all the money back? Are they really going to get a good renewal rate or are rents going to go down 50%?

RS: James, I know that you are a fan of IIPR. Is there anything that you want to say there about that?

JB: That’s incredible. Why worry about it? These don’t mature for 10 or 15 years? I asked IIPR. I called them this week — last week. And I said what — I’m looking at possible. Tell me about IIPR. Tell me about this 10, 15-year lease. What the deal is? And the terms are as he said, with escalators in there, also. I said what — I want you to think, what if I want to pay it off early? They said, why would you want to do that? I said, well, let’s assume I hit an oil well on underneath my cultivation site, or a gas well, or I discovered a gold mine on my property. And I decided, I want to pay off the lease, can I pay off the lease?

And they said, wait, no one’s ever asked that question before. I said I’m asking. I understand the present value of money. I mean, I’m obligated to pay you a lease for the next. I mean, I’m — I understand. I’m a former banker, I understand installment payments, installment loans. Surely there’s got to be a way to pay it off. You know what they said, they got back to me a couple days, well, we’d have to negotiate that at the time.

So the deal is what Julian’s worried about, now that’s 10 years from now. This stuff doesn’t mature. This isn’t up for renewal for 10 years. That’s 10 years — the IIPR just came into existence, just start doing these deals two years ago. So it’s eight years down the road. And they’ve got a killer deal. I mean, they own the market. They’ve carved out a niche. They’ve carved out an unbelievably profitable niche.

At a time when interest rates are low and they’re able to get 12% to 15% cap rates in there. Holy smokes. That’s a license to really make a bunch of money. And their stock is reflecting. I mean, the short report came out, and at the time of the short report, the stock was at 70. Jesus, last time I looked, it was 140. That’s a hell of a short, shorted at 70 and covered 140. You better do it in size, better do it big size, so it won’t be as painful. It won’t last that long. Jesus, a hell of a deal.

Other people have tried to get into the space. But these guys got the money. They got the sources for money. And they’re doing a fantastic job. Without them, the MSOs would not be able to do what they’re doing, Rena, because they have been a huge source of funds. I added up before I called them and did a little study. I added up, they’ve got basically $800 billion out to the industry, $800 billion of funding that would not have been there before. Now that is a chunk of change.

When — at the very time that these companies could not issue debt, they were able to do a deal with IIPR. I was surprised, though, that it took as long, the guy on the phone told me I said, how fast can we get a deal done? He said 90 to 120 days? Damn, that’s a long time. I used to close loans at the bank for hundreds of millions in a week anyway, I mean 90 to 120 days? That seems too long. And I just saw that somebody just — or they just upsized their deal, AYR just upsized their deal, they just raised a bunch of money. So…

RS: That’s another company whose share price is soaring.

JB: Exactly. And it’s kind of a SPAC. And you look at them and look at my numbers, they’re way up there in that leverage. They are leveraged to the hilt. And now with the additional debt they put on, if they had — in fact I told them. I called AYR, because I was writing one of my articles. And I said God, if you guys had enough money, hey, you can come into Florida and buy a Liberty Hill and make a ton. And they were up there puttering around in Pennsylvania.

RS: What do you think about all that Julian, any thoughts there?

JL: Yes. I think that’s important to not underestimate the importance of 280E tax. I think when you consider that a company as profitable as Trulieve or Green Thumb, or even Curaleaf that they have some of the highest gross margins in the nation, but they’re still struggling to turn in any free — positive free cash flow. And I think it’s important to realize that, if even the largest players are not able to get free cash flow, what about the smaller players.

So when you think about — I mean, typically, when you think about the space, or think about investing in general, you want to, you would think you’re supposed to buy this smaller player, because the smaller players should have a longer growth runway. They haven’t grown as much, there’s more growth to be had, there should be more upside.

But in the cannabis space, I’m not sure that’s necessarily true. Because when you’re a smaller player, you’re going to have — you’re going to be less profitable, you’re going to have much less access to capital. It’s going to be harder for the smaller players in general to grow compared to the bigger players. It’s very different from the typical investment framework. So I mean, it’s — you look at their strategies, they just issued debt at 12% or 13%, I forget the exact interest. I think it was 12% on the amended terms. I mean, it’s 12%. And the problem with the 280E tax is that…

RS: Which is even good for the industry. I mean, that’s even good for the industry.

JL: Yes, I mean, especially compared to 15%, with 4% escalators from IIPR, right. They’re not going to make positive free cash flow or positive income from these acquisitions. Not when there’s 280E tax. So it’s kind of like, all of these companies, they look good when you remove 280E tax. But we can’t just ignore the fact that 280E tax will exist all the way until cannabis is decriminalized.

So from now, until then, they’re kind of left having to fund losses, perhaps with more 12% interest debt, that they can’t even deduct from their income statement. So it’s like — it’s kind of a cycle that gets worse and worse. Whereas — so that’s kind of my issue with the smaller players. You’re going to find smaller names that will give you the home run.

But I think they’re going to be kind of rare burn between, because I think most companies, it’s very tough to grow while dealing with the 280E tax, because the more you grow, that means the more 12% interest debt you take on and the more losses you incur, because you’re not really able to really make any money with the 280E tax.

So I think I’ve always had a preference for the growth at a reasonable price, a framework, which would have you invest more in the big four, as opposed to perhaps some of the more deep value plays such as, for example, maybe the Liberty Health, that James is very optimistic on. I think that even though these are the bigger companies, they’re still going to generate some of the strongest growth in the industry in spite of already having such a large current revenue base.

RS: And using that thesis, what would you say about some of the Canadian players or even the international players?

JL: So I — it’s kind of bewildering to me that the Canadian players cannabis is already legalized, but for some reason, they’re not really — they’re barely reporting any revenue growth like in America you see, Trulieve or Green Thumb saying that COVID has improved their sales, whereas in Canada, they’re saying COVID has hurt their sales. You don’t really know what’s really going on.

I think if I recall Aphria and Canopy, they’re really generating kind of low single-digits or low double-digit revenue growth. I’m not a huge — maybe I don’t understand that the cannabis in Canada as well. There might be some catalysts in the future that suddenly boost their profitability, boost their growth. But if you can judge it based on the current landscape, it doesn’t seem so likely, whereas they still trade. I think last time I checked Canopy is trading at $9 billion. That’s like — that’s more than Trulieve or Green Thumb, in spite of the fact that profitability seems so, so far away.

I definitely think the current money in Canada cannabis seems to be a lot of investors hoping for — hoping to invest in America. They’re really — since the 2020 election, if I recall correctly, Canopy Growth is already up over 50%. Or it went up like 200% in a day or something. I think that the money’s misplaced. Definitely a lot of that money probably should have went to the MSOs or to the smaller players. But there’s a lot of money in the cannabis space that I mean, I don’t want to — I don’t want to be mean, but they’re kind of not really knowing what they’re investing in.

RS: Do you think that there’s anything to like there depending on — based on like the model that they’re looking at, or you think just across the board if you’re invested. In other words like if they’re looking into international markets or if they’re able to get their tentacles in the U.S. market, or you think that the Canadian market is just — they’re just not figuring it out.

JL: I think it’s important to remember what these companies like Canopy were saying in 2018 or 2017, when they were having their investor presentations. They talked about international a lot. But most importantly, they talked about America. They talked about how America is a big market, but Canopy is positioned to capture that big market.

What’s happened since 2018? I mean, Canopy doesn’t really have anything in the America, right, because it’s criminalized here. And I don’t think that’s going to be different, when you look internationally. I don’t see a reason why other countries are going to let an international firm take the profits for cannabis, the whole. I mean, they want to benefit their domestic players, right. So I think it’s possible that those Canadian companies can maybe have some revenues abroad.

But I’m very doubtful — I need to see it to believe it. I need to — I’m very doubtful that they’re going to be able to generate consistent profits, or any profits at all in an international market outside of Canada. And they’re not really generating profits in Canada. So I think that unless something changes dramatically in the Canadian space, I’m not very positive at all there.

RS: Well, there’s something that you guys are in agreement on. James, tell me what you would say to investors in the cannabis space is the most important thing to be looking at or to be cognizant of at this point.

JB: First, let me say that I agree with what Julian has said. 280 is the big problem. I would add to that, that the other big problem is that cannabis investors tend to be dumb. It’s dumb. Now the only explanation for Canada, stocks going up as a result of our elections was dumb. And what it was is people with lots of dumb money. You can have a lot of money and still be dumb. And if that’s the case, then what you do is, when something like that happens, you buy the Harvest MJ ETF, which is loaded with Canada companies, and then they have to take the money, and they have to buy wonderful stocks like Aurora Cannabis, And Canopy…

RS: I don’t know if you guys can hear the sarcasm through the audio, but I hope you guys are hearing that.

JB: I don’t know. But the point is that it captures that dumb money and the dumb money goes, and then it forwards on to Canada. That’s what drives — that’s what’s really driving. And so that’s kaput. I mean that sooner or later, people will learn. It will take time. It’s going to take time, because these are — based on my experience these are not the sharpest knives in the kitchen. And so we’ve got to educate this deal.

Secondly, we’ve got to educate the cannabis industry. So what. We’re getting taken to the cleaners on this 280E. What we’re really doing that’s dumb is the companies are actually paying their taxes, paying their taxes. You shouldn’t pay the damn taxes. What do you mean? That’s seditious. No, no, no.

Look, if you don’t pay your taxes on time, as a corporation in America, you have to pay a penalty. Are you ready? Your penalty? Yes, what is it? 1/2 of 1% a month? Oh my god. That’s 6% a year? Well, hell, that’s half of what I can borrow money at. These companies that are paying Uncle Sam the taxes are crazy. They should not be paying their current tax bills. Their best source of money is not issuing equity, not issuing debt, not leasing their properties, their best source of money is not paying their taxes. Now isn’t that…

RS: What is — I bet you’ve said that to an executive before, what’s their answer to you?

JB: And I asked that CEO. I said, who in the hell told that person to write that check? He said, well, you know as much as we do. I said, that is sad, that is sad. See the knives, the dull knives are not only in the investment… Some of it is right at those companies. They’re writing those checks. Now that — doesn’t that seem bizarre to you, Rena?

RS: It’s another one of the bizarre things that make up the cannabis industry. There’s a few of them, that’s definitely out there.

JB: Between you and me, and Alan, and some of the others, we’re going to get rid of this bizarreness, and sooner — that we’re going to educate the people and they’re going to begin to understand. They’re going to be begin to understand there is no rationale for the dispersion that we see in the performance and stock prices. They just don’t — they’re not insane. And there’s no reason for that.

Now down the road, what we need to have and coming pretty soon, what I want to see is, all these suckers that are going in all these states, these MSOs. My god, I want to see state by state when they put together their consolidated financial statements, I don’t care about the balance sheet. Hell, all I want to know is income statement, and cash flow. I want those prepared by state. Tell me how you’re doing in that state.

Because right now, you take a company like Trulieve, hell, it’s just milking Florida, it’s milking. Because it’s having to feed that monkey up there in Massachusetts. It’s been feeding that monkey for a year and a half. But it takes time. And it’s going to — these people are feeding those monkeys in those other state — well, it takes time. Well, let’s start having some numbers. Let’s start seeing how we’re doing in those states. Let’s see what the performance is.

Now I think some of them may not even have these systems in place to know themselves how in the hell they’re doing. But that’s where we need to go. There’s a lot of improvements needed and they are underway. I mean, Rena, you know that and I know that. Here’s an industry that’s four years, three, a couple years old. It’s not that old, there’s a lot of growing pains. But in those growing pains, a little knowledge can go a long way.

I’ll give you an example, Rena. People down here in Florida are just complaining and say what that new stuff is costing $60 an eighth. That’s way too much money for an eighth. Well, hell out in California, they got eights that are selling for 120 and they can’t keep them in stock. You go into a liquor store, and you’ve got — you can buy ripple wine for two bucks. Or you can buy Chateau Lafite Rothschild for $1,000. What do you want? A lot of people like their Chateau Lafite Rothschild. By the way, I had some at some one time. It was just awful. Just threw it away, threw it away followed it up with Gallo Hearty Burgundy. Everyone admitted it was better.

RS: There you go, heard it here first, heard it here first, people. Julian, what do you think’s the most important thing for investors to know right now?

JL: I would say cannabis investors would do well by really focusing on how they’re investing in the space. I think that, you probably cannot go wrong by investing in the big four, the largest players just because they have the easiest access to capital. But if you’re going to try to look for the deep valleys, like investing in the smaller players, I mean, James is working really closely with Liberty Health. So in that case, it can make more sense.

But I think for the majority of investors, it’ll be very difficult to find the winners in the smaller players. I don’t doubt that. On average, the smaller players will produce very strong results. But it might be hard to find a specific winner. So if you really wanted to do that, it might make more sense to take a basket approach, and to kind of own all of those smaller players just because you don’t know if you miss out on that one name that delivers a 500% return over the next year, that could really be detrimental to your results if you were only investing in those smaller players.

So I definitely think a basket approach of both the big four and optionally the smaller players can make a lot of sense if you wanted to do that,

RS: To piggyback off of that, and I’ll leave this as our last kind of question. But we…

JB: Can I add one thing.

RS: Yes, go for it. Of course.

JB: I wanted, as a former registered investment advisor, who used to run a lot of money, somebody came to me right now says, doctor what should — I want to be in the space, what should I do? I said, well, right now, to make it easier on yourself, I want you to take 10% of your assets, I want you to put one-third of it in Trulieve, one-third of it in AdvisorShares, MSOS and one-third of it in Liberty Health. That’s what I tell him to do. And then just put it away and do not look at that sucker for a year. Do not look at it, please. That would be my advice.

MSOS, they get the whole — the whole deal; Trulieve, they get the one with all the economies of scale, the one with the highest gross profit, the one with wind in their sales in the state that it’s milking. And then they get one that I think is just the most undervalued stock there is in the universe. So they got their bag.

RS: Well that’s exactly what I was going to say, is…

JB: You need to put some money in there, Julian.

RS: Is the MSOS ETF really seems like if you’re going to take a basket approach, I mean, that’s the basket. So that was going to be my piggyback. Julian, do you have any thoughts on MSOS or the ETF space?

JL: I think I definitely need to look a little more into MSOS. If I recall, when you buy it, you’re not really buying the stock. They’re doing some very interesting ways of equating the financial performance of the stocks with some derivatives. It probably will be fine. But I — my personal investment philosophy tends to be a little more simple. I don’t really like things I don’t quite understand.

But I think it’s definitely a step in the right direction. I think that compared to just randomly choosing really cheap stock that you don’t really know in the cannabis space and thinking that’s going to be your only bet and is going to do very well. I think buying MSOS is a big upgrade compared to that.

So I think if one takes away anything, a basket approach to this space will do very well. I think all the names — a lot of things at least, they’re all very competitively priced. They all have very comparable upside. You might be missing out on maybe a couple percent by not focusing on just one stock but a basket approach. It should do very well for most investors.

RS: James, anything you want to say about those derivatives?

JB: Yes, absolutely. I had a long visit yesterday with Dan Ahrens at AdvisorShares, who is the portfolio manager of MSOS. And I asked some questions. He is you’re kind of asking some pretty specific questions. I said, well, I used to have my own family in mutual funds. They were called the Baker Funds. And so I know a little bit about the business.

Now I know that you are not buying the actual stocks. He’s not. He’s buying swaps. And he has to make it legal. That’s what enabled him. It took him a year. And I congratulated him, because I tried one time to get the SEC to approve a fund, I wanted to start based on duration. I wanted to do the first duration fund. And the SEC said, what the hell is this duration? You can’t do a fund based on duration.

I said man that’s crazy. But they had to jump through some hoops to get this done. And the hoops they had — they are not right now allowed to directly own those stocks on the CSE that are traded over the counter here. However they have swaps. They have collateral agreements behind those swaps. I was comfortable with those. I asked them specifically what kind of protection you have on the collateral? Don’t want to do an AIG or Lehman Brothers or uncollateralized derivatives and stuff like that.

So he was taken aback by the questions I said just relax. I mean, these are just serious questions. And so I don’t have any qualms about that. And as soon as it is descheduled, as soon as cannabis is descheduled, they will be able to own the stock directly and they will do that, they will do that.

So I’m comforted by that. I’ve looked at the portfolio. I’ve asked him, I said, well, he said here, you can only own TSX, and TSXV in it. But you own a bunch of CSE stocks. He said well, you didn’t read far enough. And he called my attention. You’re absolutely right. I failed, I didn’t see that deal. So I’ve looked at that sucker from the standpoint of having been an owner of a mutual fund, and having run a mutual fund.

So I asked him the questions to make it comfortable. And because I was coming on this show, and I wanted to make damn sure I was right. And I didn’t want to put my name and reputation on the line. But I can wholeheartedly without reservations, say that, man, if you want to be in the space and don’t want Trulieve you won’t — you need to buy my Liberty Health now. But if you won’t, you got to buy Dan Ahrens at MSOS, just do.

And in fact, it’s the only one — and by the way, it’s the only one. If you’re at Merrill Lynch, you can’t even — you can’t buy these stocks, or Morgan Stanley, or Goldman Sachs, you can’t buy the stocks we’re talking about other than the ones that are listed. But you can buy MSOS because it’s list. So that’s a natural.

And the other thing importantly, I don’t know if you’re aware of it, Rena, they’re now trading options on that sucker. Now that’s going to get exciting. You want to lever up a little bit. Right now it’s thin, it’s very thin. I’ve been looking at those options. And it’s very thin. But that’s the only play I know like that. That’s the only game in town. So that gets pretty exciting.

And I don’t know, I think it’s on RobinHood now. Christ if it gets on RobinHood, watch out. Because I’m watching time and sales on some of these tickers. I mean, I see guys coming in here, I’m dazzled. People buying 10 shares of a stock at $0.39. It’s like they got lost on the way to the ice cream store. I don’t know how is that possible?

JL: If I could ask one more question for you, James. I was wondering, typically with an ETF, they maintain — they try to manage that premium discount to the underlying holdings. Considering that MSOS is using swaps instead of buying the stock, how are they maintaining? Are they actually are doing anything to maintain that? Trying to be as close to 0% premium discount? What are they doing there?

JB: I haven’t tracked that. But as you know, all the ETFs have to do that problem. But every day they’ve got to get their net asset value, Julian. On the day — by the way, tell you an interesting story, that they had a crash in October of 1987, The Wall Street Journal on the next day only showed one mutual fund that rose in net asset value that day. Everyone else was Xs and Vs and that and the one fund that went up that day after the crash, was the Baker Equity Fund. It was 100% cash, 100% cash the day they had a crash, went to cash three days before the crash.

And then I decided that was it. I’m out.

RS: All right, James, and Julian, anything else before we go?

JB: This is great. I mean, let’s educate the masses. Rena, let’s do whatever we can. And oh, I would say, the best thing they can do, a number of people have asked me, get my last two articles, those exhibits that I prepared. Those were hundreds and hundreds of my hours put into those exhibits. And they ought to take those exhibits, and use that if they want to know relative values. And who has the best gross profit and who has been — where the trade — where things are trading. At least that was at that moment in time what it was.

And I will update those in the future at some time. But that gives them a perspective. And then they can make their own judgment, make their own judgment, you decide what you want. But you’ll be able to identify on a revenue basis or EBITDA basis or price earnings or you’ll be able to identify what’s the cheapest what’s the most expensive, then you make your choice?

RS: Absolutely. I mean, that’s what we’re trying to do here on the podcast is educate and inform. But also not spoon feed, also give them enough that they can make their own due diligence and I think that’s definitely what you’re doing on Seeking Alpha, bringing a lot of insight and data and analysis to readers. So people that want to follow James V. Baker on Seeking Alpha, you can look at those articles. Julian Lin also doing great work on Seeking Alpha, covering cannabis [and has a Marketplace service called Best Of Breed, a research service uncovering high conviction investment opportunities in the high quality space].

JB: Oh, can I put in a plug for my Facebook page, Facebook page. They need to go to the United Liberty Shareholders Group. United Liberty Shareholders Group. That’s the group I had up. That’s the group I founded. Come join the hundreds of members.

RS: And you can find that on Facebook, that’s for Liberty Health.

JB: Facebook, and otherwise they can email me at — my nick –, my email is thunder561@gmail.com. People thought that was thunder. That’s it. One guy criticized me that’s a childish name. Actually, it was named after — fellow tennis pros called me Thunder, because whenever they hit it to my forehand, they found that it was lethal. They called me Thunder. That’s forehand. Thunder561@gmail.com. Come on home.

RS: Love it. A more colorful and more insightful conversation, I don’t think anyone’s going to find anywhere else. Julian and James, it’s really always a pleasure. Thank you both so much for joining us and sharing your time and your wisdom and your insights. I really appreciate it. I know the listeners do too.

JB: Thank you very much, Rena. Thank you, Julian. Good to see you again.

JL: Thanks for having us. And also thanks for all your podcasts. I think they’re indispensable resources for anyone looking to invest in the cannabis space, Rena.

RS: Thank you. That’s very sweet. I did not tell you to say that. I really appreciate that. Thanks, Julian and James. And then until next time, happy holidays. Hope you guys stay healthy and well and I’ll talk to you guys soon.

Thanks so much for listening to the Cannabis Investing Podcast. Subscribe or follow us on Seeking Alpha, Libsyn, Apple Podcast, Spotify, Google Play or Stitcher. And we’d really appreciate it if you could leave us a review on Apple podcasts. It helps other investors find our show. If you have feedback or questions, we’d love to hear from you at rena+canpod@seekingalpha.com.

Thanks so much for listening and see you next time.

Editor’s Note: This article covers one or more microcap stocks. Please be aware of the risks associated with these stocks.

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