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The Outsider Club’s Jimmy Mengel on the Huge, Quickly Evolving Marijuana Market & His Upcoming Free Marijuana Millions Investor Summit

July 30, 2018

Gerardo Del Real: This is Gerardo Del Real with Small Cap Stock Digest. Joining me today is the Managing Editor for Outsider Club, Investment Director of the personal finance advisory The Crow's Nest, and cannabis stocks advisory The Marijuana Manifesto, Mr. Jimmy Mengel. Jimmy, how's it going today?

Jimmy Mengel: Great, Gerardo. Always a pleasure.

Gerardo Del Real: Well, you know we haven't had a chance to catch up. The last time we spoke I believe was back in January, and obviously there's been a lot going on in the cannabis space since then. Probably the biggest news was the legalization in Canada, and I thought that we could start there. And I'd love to hear your take and what you're doing to position subscribers and your followers for what's obviously a huge, huge megatrend that's just in the infant stages, frankly.

Jimmy Mengel: Yeah, it's been exciting. When I first started covering cannabis stocks, you really only had Canada to look to. I had told my readers to buy Canopy Growth. I was actually the first newsletter writer to visit their facilities, and I could kind of see the writing on the wall back then, this was maybe 2014. They were talking about it then, and I had spoken with guys in town that saw a lot of manufacturing jobs being shipped overseas. They were really excited about it as a job prospect.

I talked to police officers that were just tired of just arresting people for minor marijuana charges, and then I obviously talked to the business leaders out there, and they saw this coming a long time ago. To finally reach that stage of complete legalization, not just medical legalization, it's been pretty groundbreaking. All of the stocks that I had recommended before all this happened just went absolutely insane.

Gerardo Del Real: Excellent. Now, as far as the next steps with the legalization, what does that look like and how does that translate for speculators and investors? How should they be positioning? Let's go one at a time. What are the next steps? When do things take effect? And when will we really see a change in Canada?

Jimmy Mengel: I think it's still a little up in the air. I mean everything has been passed, so I think it's going to be about 8 to 12 weeks until legalization fully kicks in. So we're looking at a couple months from now, maybe October. I think for those people currently holding the larger stocks like Canopy, Aphria, Aurora, I think the proof will be in the pudding when they start releasing their financial results after legalization has kicked in. Right now, they're still pretty hamstrung about what they can sell, but once that floodgate opens and you actually see the money rolling in, I think people will be pleasantly surprised at how well they are doing now that they can actually sell it across the entire country.

Gerardo Del Real: Which companies, Jimmy, do you think have a leg up as far as differentiators? Do you think it's the companies that already have warehouses in place and infrastructure, that have clean balance sheets, that can scale that out, or do you think it's going to be a lot of the new entrants into the market? Are there big barriers for newer entrants to come in and gain market share?

Jimmy Mengel: There certainly is. There's a couple different ways I like to look at it. The first movers, like the three I mentioned, obviously have the infrastructure ready. They're able to produce product, get it out the door, brand it and provide the supply to meet all of the demand there is going to be. For people that are newer, I think it's really going to come down to offering unique products. There's going to be sort of a race to the bottom in terms of if you're growing flower to try to make that cost effective. And it's going to drive the price of marijuana way down when you have all of these people competing and trying to provide cheap marijuana to the teeming hordes.

I like to look for more unique brands, delivery methods, and angles that aren't just about supplying the flower or just selling marijuana. Just like you see in the beverage industry, you can sell somebody a $0.10 bottle of water, but if you brand it correctly all of the sudden you have people buying $2, $3 bottles of Evian, which is kind of funny, because "Evian" spelled backwards is "naïve."

But that's how consumers work. There's no reason you buy a $3 bottle of water, but people do. It really is going to be in those more interesting ways of positioning the product, whether it be for recreational markets in terms of edibles, beverages, and then in the medical arena. I have plenty to say on that later, but I don't think people are getting rich just growing marijuana. They're really going to have to treat it like a business and brand it accordingly.

Gerardo Del Real: Interesting. Now, in fairness to the water that you mentioned, it does make me feel like I'm underneath a waterfall every time, Jimmy.

Jimmy Mengel: Crisp and cold, I'll take your $3 and it costs me $0.05 to make. That's what you do when you have a business.

Gerardo Del Real: Absolutely, absolutely. You mentioned medicinal marijuana, there's a huge opportunity there. I read a piece that you did, I believe, for Outsider Club recently about your 4th of July celebration and your conversations that you had with people at the parade in regards to the cannabis space, what you do for a living, and the huge opportunity I read that you got to meet some pretty interesting people with some pretty interesting stories that were excited about the opportunities here in the US on the medicinal side.

It's a huge global market with a big opportunity. Can you share a bit of your insight as to that market, and your interaction and what that due diligence process looks like when you're looking for companies in that space?

Jimmy Mengel: Well, I think that's the most exciting part. For example in that article, it really was a 4th of July party, we were just hanging out, watching a parade in a very conservative area of Maryland. So it's not just a bunch of stoners saying, "Alright! We get to smoke weed now."

I talked to a nurse who was having a lot of trouble treating people with opioids, and the horror show that comes from being addicted to such medications. She was asking me a lot of questions about which ailments can be treated safely with cannabis without the addictive effects.

And again, I talked to a police officer who kind of said the same thing as the guys I talked to in Canada, which is, "I'm finished wasting my time arresting people for small amounts of marijuana, I have way more important things to do."

I even talked to a shock trauma doctor who said essentially the same thing.

And these are people that you don't typically associate with marijuana legalization, but every single person that found out that I research medical marijuana all were very, very supportive. I think you're seeing that across the country, too. Just a couple weeks ago, Oklahoma passed one of the most lenient medical marijuana laws in the country. And that's a very, very red state, which of course you don't associate with marijuana.

Gerardo Del Real: Right.

Jimmy Mengel: But they approved that legislation, so if it can happen in places like Oklahoma, North Dakota is set to unveil something soon, those are the dominoes falling. When those kind of places open up their markets, then that's when we're going to see more, I guess you would say legitimization to the industry. That means more companies being able to up list to the New York Stock Exchange or NASDAQ, that means more institutional investors coming in. And on the medical side it means more large-scale studies will be able to be done just because there's that public acceptance.

It just snowballs from there. And a lot of people ask me just like, "Well, did I already miss the boat on marijuana stocks?" And I say, “Absolutely not.” While 50% of the country right now does have access to some sort of legal marijuana, that will continue to improve, and all of these other markets will be opening up, and I think now is the time to really start positioning yourself.

Gerardo Del Real: Let's talk about that, Jimmy, for people that aren't already subscribers or following your work. I know that you are hosting a medical marijuana summit. It's a webinar that people can subscribe to and sign up for. Can you tell me a bit about what that looks like, what people will receive in terms of information and how they can go about participating?

Jimmy Mengel: Yes, absolutely. Obviously from a financial standpoint, I honestly believe that you can make a ton of money if you start investing now, there's just no two ways about it. However, a lot of people maybe aren't as enthusiastic about legalized recreational marijuana, and I think the first big steps to be taken in the United States will be for medical marijuana companies, which is far more popular. The AARP just did a study, and it's something like 87% of people agreed that medical marijuana should be legal, which is much, much more than recreational.

Gerardo Del Real: Correct.

Jimmy Mengel: We're putting together this summit, it's going to happen August 1st.

That’s this Wednesday.

And I'm going to fly out to Washington state to meet with Nick Hodge, who runs the Outsider Club, and we're just going to sit down for an hour and I'm going to lay out everything you need to know about medical marijuana and why it really is probably your best shot at the next big wave of investments not only in this sector, but in all sectors.

Gerardo Del Real: That's fascinating. How can I tune into that?

Jimmy Mengel: We will be sending out emails that you can opt into. If you go onto makemarijuanamillions.com right now and sign up for your spot.

I'll even give you a free stock pick, and you can judge for yourself if that's something you want to get into and you really want to take your investing to the next level with medical marijuana stocks.

If you subscribe to Outsider Club, which is outsiderclub.com, we're going to do a big run up to the event and you'll be able to sign up that way. I also cover the industry all the time, so it’s a great resource if you’re interested in the sector.

Gerardo Del Real: Excellent. Just to be clear, outsiderclub.com is a free e-letter, so when you say subscribe, people can subscribe to the free e-letter and get all the information there. Is that accurate, Jimmy?

Jimmy Mengel: Yeah, it's completely free. The summit itself is also completely free.

Gerardo Del Real: Perfect.

Jimmy Mengel: I just really want to educate people about the medical side of things, because I think a lot gets lost in the recreational angle. But medical marijuana can save people's lives and it's rather remarkable and I don't think it currently gets the credit it deserves. As we see kind of government regulations start to be lifted and we actually are able to have studies come out that prove these things that are kind of at this point anecdotal, we are going to see a huge, huge difference in our medical system and the way we prescribe drugs to people. It's way more important than most people think.

Gerardo Del Real: Perfect. Jimmy, how can people get ahold of you?

Jimmy Mengel: You can subscribe to the Outsider Club list, outsiderclub.com. Like I mentioned, I write about marijuana pretty frequently on there. As you mentioned earlier, I do run the Marijuana Manifesto, which focuses completely on marijuana stocks of all kinds, recreational, medical, and even the picks-and-shovels industry, which also kind of goes overlooked.

Gerardo Del Real: Reach out to you through Outsider Club, perfect, and I know there's a customer service tab there, correct?

Jimmy Mengel: Sure, yeah. If you have questions, you can send them to customerservice@angelpub.com, and I'm happy to answer questions, I read all my mail. I know people do have a lot of questions, so I try to tackle those in the newsletters and pretty much give you an entire view of the industry from really an unbiased standpoint. I do look at it as an investment opportunity, but I also believe in the medicinal quality of cannabis and I think we're all going to be very surprised in a few years and kicking ourselves for not doing it earlier.

Gerardo Del Real: Fantastic. Jimmy, anything else that you'd like to add?

Jimmy Mengel: I would, yes. A lot of people are talking about Canada and talking about the United States in terms of marijuana investing, but people often leave out the global impact that this is going to have. While the United States and Canada are the biggest markets now, this is spreading all over the world. I read one study where it looks like it's going to be almost a $60 billion industry in the next 10 years. Places like Germany, who have legalized medical marijuana, that's a population of 82 million people, where Canada is somewhere around 36 million. When you open up a market like that with medicinal marijuana in Germany, that's doubling the amount of people you can sell marijuana to.

The great thing about Europe is that they do have insurance that pays for your medical marijuana, which is not the case in Canada and has not been the case in the United States. Europe has about a $1.3 trillion dollar healthcare industry that is government-subsidized, once you introduce legal medical marijuana – you know, when we go to buy medications, it's a lot different when your insurance company is paying for it, versus you having to pay out of pocket, go to a dispensary, and kind of the dog-and-pony show that comes with medical marijuana now. If you have insurance covering those costs, not only will that drive the price up for certain products, for better or worse, but it also, again, legitimizes it, makes it something that people are going to feel more comfortable doing, versus if they have to go to the doctor and pay out of pocket, which nobody likes to do.

Gerardo Del Real: Right.

Jimmy Mengel: It's not just Germany. Italy has done the same thing, they're projected to be $1.2 billion market in the next 10 years. South America, places like Brazil, Argentina, Uruguay, that could be $775 million by 2027.

Gerardo Del Real: Wow.

Jimmy Mengel: Even Australia. Australia, they're projected to do about $52 million dollars this year in medical marijuana, but in the next 10 years that's supposed to jump to $1.2 billion. A lot of the companies I recommend, that is one of my main things I look at, is what's your global outreach? Because a lot of these countries don't have the kind of technology and aptitude that we have here or in Canada, so these companies are expanding into those areas and it's completely new territory. They'll be the first movers in those areas, scooping up their portions of billions of dollars. Again, a lot of people are like, "Oh, I missed out on the marijuana boom," and you really didn't. It's only just begun, and the sooner you act, the better.

Gerardo Del Real: Fascinating stuff, Jimmy. It's a huge market, it's evolving so rapidly. I'd love to have you back on after the summit, after you host the webinar, I'd love to hear the feedback that you receive during that. Again, hopefully you can keep us updated here soon.

Jimmy Mengel: Yeah, absolutely. It's always a pleasure, I'm happy to come talk anytime. If people want to sign up, I would recommend taking an hour of your time watching our webinar, makemarijuanamillions.com or outsiderclub.com. Sign up and we'll tell you everything you need to know, and as I said, I'll throw in a free pick that I'm really excited about and we'll take it from there. It's going to be fun.

Gerardo Del Real: Excellent. Jimmy, thanks for your time.

Jimmy Mengel: Thanks, Gerardo. Take care.

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