When CNBC host Jim Cramer needed someone to lead his $400 million hedge fund, he turned to Todd Harrison.
Harrison walked away from Wall Street more than 15 years ago. Yet today, he’s getting back into the hedge fund business with a brand-new cannabis hedge fund that’s 100% focused on investing in publicly-traded cannabis stocks.
Up until now, investment funds in in the cannabis sector have focused on privately held investments.
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On Wall Street, most investors remain on the sidelines.
Harrison, who started his career on Wall Street working as a derivatives trader at Morgan Stanley, thinks that void creates an amazing opportunity for early investors.
In late August, he sat down with Real Vision for an in-depth interview.
The primary reason that Harrison is investing in the sector is because this is an early opportunity that is going to completely disrupt health care.
“I’ll tell anyone who will listen that Jeff Sessions and Donald Trump are the best thing that could happen… because it’s kept a blanket on prices… it’s kept a blanket on the whole psychology surrounding this…
Once the efficacy is demonstrated. and once people realize that this isn’t about smoking a vaporizer on a Saturday night. This is actually about killing brain cancer. And reducing elliptical seizures in children by 50%. Cutting them in half!
And people start to understand the efficacy across not just one ailment… but across a whole host of medical conditions. We believe that that’s going to be the real arbitrage.”
For decades, American’s have been told that cannabis is a dangerous drug. And the Drug Enforcement Agency’s classification of cannabis as a Schedule 1 drug helps perpetuate this idea.
As someone who grew up in the 1990s, I’m all too familiar with the government’s campaign against drug use. In school, we were required to go through a “Drug and Alcohol Resistance Education program, better known as D.A.R.E. (NOTE: The program has since lost government funding, after numerous studies found that it was completely ineffective).
Now, critics of the whole legalization movement will point out that cannabis a “gateway drug.” By that, they mean people who start out smoking weed go on to use more dangerous drugs. However, Harrison argues the opposite:
“We’ve been fed this line of thinking about cannabis that it’s a gateway drug. And yes, it is a gateway drug. It’s a gateway drug off of opioids. It’s a gateway drug away from heroin. It’s a gateway drug in the right direction.”
Numerous studies have found that if you’re under the age of 21, cannabis is terrible for you. It’s terrible for brain development and use at a young age can have real and long-term consequences.
But as people get older, it becomes a health benefit. He specifically notes that studies show positive results for people suffering from dementia and Alzheimer’s disease. Today, there are over 85 trials underway with the Food & Drug Administration. And early results are very promising.
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Todd Harrison sees two tradeable opportunities in his cannabis hedge fund.
The first is companies in the business of cultivation of cannabis. The best way to invest in those companies is through Canada’s government licensed growers, distributors and dispensaries.
Second, companies that are focused on using cannabis to solve health programs. This includes creating cannabinoid-based drugs to treat brain cancer, dementia, Alzheimer’s and a host of other diseases.
Hedge funds often like to get into trades early, before they are recognized by most investors. And that’s exactly why now is a great time to get into this booming market.
Harrison believes that four arbitrage opportunities could take place to unlock value in the sector within the next three to six months.
1) Price: Today, institutional investors are NOT investing in the sector. They are sitting on the sidelines, waiting for greater clarity on legalization. Even though the growth potential is massive, most institutional investors will not invest today. When they do, expect billions in capital to flow into the sector. Prices are low today, and they’ll surge once we see institutions stepping in.
2) Time: Policy in Washington, D.C., will change. There is already immense pressure from state governments that are legalizing cannabis. 60% of Americans think cannabis should be legal. It’s only a matter of time before we get nationwide legalization. It’s possible that this could happen within just three years.
3) Perception: The popular perception today is that legalization is about “getting high.” For some folks, this is about getting high. However, the bigger opportunity is related to health and wellness, and creating drugs to help people who are suffering. As views toward cannabis shift toward health, the whole opportunity becomes more attractive.
4) Liquidity: Up until now, most opportunities in the U.S. market have been private. Angel investors, private equity funds and boutique venture capital firms have been funding this early-stage sector. As institutional investors get invested, we’ll see a dramatic increase in liquidity for the sector.
The growth for the legal cannabis sector is huge. Some estimates peg this as a $100 billion market. As this industry emerges, early investors stand to earn a fortune.
One legal cannabis company is quietly completing a private financing . . . and getting ready to go public in January.
Go here to discover how to grab private shares, before this Oct. 6. IPO.