By Barry Randall As someone who runs a technology fund, these are the good old days. Every day seems to bring another innovation. From drones and electric cars and flow batteries to virtual currencies, graphene and 3D-printed human organs, we're awash in game-changing technologies moving quickly out of the lab and into the streets. Literally, in the case of self-driving cars.
An extremely versatile plantSo from an investment perspective, the problem isn't finding opportunities; the real challenge is filtering out the good ones from the bad. And here's a secret. Professionals like me have more tools than regular folks, but what we mostly have is experience. Years of reading documents and hearing presentations hone our scanning skills. A Bloomberg terminal has its uses. But so does our Spidey Sense. Because I'm a student of the up-and-coming, I also notice progress in other areas besides tech. One hot area is industrial hemp (hereafter referred to as "hemp"). While hemp's genetic cousin marijuana gets more of the headlines and the controversy, non-intoxicating hemp is having a break-out year. This is because of an amendment to the Farm Bill, signed back in February, which granted U.S. universities and colleges the right to grow hemp for research purposes. This new and limited legal status is expected to expand over time to allow hemp to be grown more widely and without restriction. Already, over $500 million in hemp-based products are being sold annually in the U.S. However, all of these products rely on hemp grown outside our borders. If hemp were able to be grown, harvested and processed entirely within America, then more of the value-added profit would stay here too. Hemp happens to be an extremely versatile plant. It grows quickly, even in substandard soil. It requires little water and can be processed into food, soap, rope and cloth. A hundred years ago, hemp was a huge crop in the U.S. As recently as World War II, hemp was grown and processed into a uniforms and naval cordage, among other uses. Now, after more than 50 years of being as illegal to grow as pot, hemp is ready for its close-up.
Investors are already clamoring for ways to participate in the renaissance of hemp in the U.S. But hemp "pure-play" opportunities within the equity markets have been limited. One of the few public companies available to investors is the aptly named, "Hemp Inc." (HEMP) based in Las Vegas.
What happens in Vegas …Apparently, what happens in the hemp business in Las Vegas doesn't stay in Vegas; it's immediately broadcast by Hemp Inc. through a steady stream of news releases. All of Hemp Inc.'s news releases say much the same thing - loosely translated as, "The future is so bright, we gotta wear hemp shades." As I noted earlier, professional money managers like me have sophisticated tools and training to analyze a company or an industry. But sometimes, all you need is a well-honed sense of right and wrong. And a typical Hemp.com news release is a whole bowl of wrong. A recent news release issued on July 10 was typical and is itself an object lesson in how NOT to present your firm as a publicly traded company. First, at 2,855 words, it's too long. Way too long. A good news release is about 500 words. Any more and it not only tends to bore the reader, it also calls attention to the fact that the company doesn't know how short a news release ought to be. Next up, this particular release reads like a letter tucked into a Christmas card: droning on and on about how "[w]e are very excited;" how our product "is expected to be an easy sell;" how "Hemp, Inc. has been doing exceptionally well according to its executives." A proper news release might convey optimism about the future, but bases it on the recent past: "Our revenue in the second quarter came in at the high end of our forecast range."
The entire second half of the release is an introduction to twelve separate "publicly-traded" subsidiary companies, each with sub $0.01 stock prices and typically with only 1-2 employees. Uh oh. Reading them is like having Cletus, your hillbilly cousin, corner you at a reunion with a rundown of the shadier side of your family tree.In short, hemp (the plant) may be ready for real growth. But Hemp Inc. (the company) should be given a wide berth. Did I mention that the CEO is a convicted felon? Well, you probably could have guessed that. It's true: Plenty of bad companies run by bad people have issued beautifully worded news releases. But reputable public companies are unlikely to issue something as bad as this Hemp Inc. wowser. Calibrate your Spidey Sense accordingly. Disclaimer: All investments involve risk and various investment strategies will not always be profitable. Neither the information nor any opinions expressed constitutes investment advice and is not intended as an endorsement of any specific portfolio manager. The opinions and views expressed herein are of the portfolio manager and may differ from other managers, or the firm as a whole. Past performance is no guarantee of future results.
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