Ted Ohashi's investment philosophy
QUESTION: I follow Alan Brochstein of New Cannabis Ventures. In the forum I found his comment about you. What is your reaction to what he said about you? It disappoints me a little bit and makes me doubt I am doing the right thing.
“Yeah, Ted O is a bit of an enigma. He acts like a paid pumper, which makes it hard for me to respect his work. In an industry that is so nascent, trying to be confident in the future winners is hard enough. Ted marries these companies and defends them against all reasonable doubts or their future success, to his own demise.” Alan Brochstein.
Thank you for your reply!”
M. de G. from Netherlands
ANSWER: I appreciate every one of your great questions but if I tried to answer them all, I wouldn’t have time to do anything else. I can answer many of your questions by sharing the space with others who have similar queries. This works better for everyone, I think. Sometimes, though, you come up with a totally unique question and this is certainly one of them.
Alan and I have been covering the cannabis sector for many years and have communicated from time to time. Most of our chats have been initiated by him and almost always relates to a healthy difference of opinion about the outlook for a stock. Having spent more decades in the investment business than I care to admit, I have had such discussions with many people. I spent much of my early years dealing with individual stock brokers and later as an analyst pitching a portfolio manager and as a portfolio manager being pitched by an analyst. I have always warned investors not to burn bridges because in the stock markets, your worst enemy this year can be your best friend next year and vice versa. So I do not take personal umbrage at Alan’s statement. I don’t know when he wrote the comment but I suspect it’s something he did and soon forgot about it. I can assure you that after I have written this response, I will forget about it and move on to other things.
That leaves the couple of issues Alan made in his comment. I may act in a way that makes Alan think I am a “…paid pumper…” but I am not. I also don’t think I marry companies. Neither do I defend them against all reasonable doubt in my opinion.
Let me explain.
As regular readers know, a critical aspect of my investment philosophy is the quality of management. As a fund manager, I would often say, “I would rather invest in good people with a bad idea than bad people with a good idea. But I spend my time looking for good people with a good idea.” For me, people are the key.
When I think of Khiron - cannabis, Colombia, Latin America, population size and best climate are all important considerations but I think immediately of Alvaro Torres, Chris Naprawa, Andrés Galofre and others. And if doubt creeps into my mind because the stock drops, I just ask myself, is Alvaro quitting? Is Chris giving up? Has Andrés stopped trying? It helps me to keep going.
When my thoughts turn to 1933 – the U.S. market, cannabis infused products and highly visible growth prospects are important but I think of Brayden Sutton and now Chris Rebentisch and others. If a declining market carries 1933 stock lower, do I see Brayden continuing to work hard? Is Chris there turning on the lights every morning and turning them off every night? It gives me confidence to keep going.
When Lexaria comes into my mind - DehyraTECH™, Altria, and cannabis are important but I see Chris Bunka, John Docherty and others as the key. If Lexaria shares decline and reduce the value of my portfolio, I ask myself does Chris still believe in the technology? Is John Docherty still testing the scientific basics of DehyraTECH™? I still wish the stock was higher but it helps sustain my belief.
When Sunniva is my issue of the day – I think of California, the glasshouse and the revenue growth potential but Dr. Anthony Holler and Leith Pedersen and Dave Negus who have both stepped aside to allow management to move to the next stage are critical. I wonder if Tony is prepared to go all in. When he is willing to step up and be counted then I am too.
When I think of Cannabis Growth Opportunity Corp – I think of a strong portfolio of private companies, I think of a portfolio of public companies that have proven success and I think of getting it all for $0.50 on the $1.00 but Jamie Blundell and Bruce Campbell are critical. I see Jamie committed to finding excellent private companies to invest in and Bruce works hard to maintain a strong public company performance record. It gives me confidence the discount to Net Asset Value will contract.
Are these companies I’m married to? I see these as the sauce that thickens after the ingredients have been reduced. To get here, I have “divorced” many names. For example:
Namaste Technologies: first recommended at around $.25 per share, ran up to over $3.00 per share and I moved out above $2.00 per share when management became too concerned with promoting their stock price and less concerned with running the business. Oh, there were also several questionable transactions along the way.
Organigram: first recommended around $4.00, ran up to over $10.00 per share and I moved out around $8.00 per share. I stuck with the person I thought was the heart and soul of OGI, Denis Arsenault, through the myclobutanil scandal and stuck it out when Arsenault agreed to move upstairs. Sold as the stock moved up in price.
Radient Technologies: first recommended around $0.50 per share, ran up to close to $2.00 per share and sold out at around $1.00 per share. Bought in the expectation that an investment from Aurora Cannabis would mean an automatic customer for their extraction technology. As this didn’t develop as quickly as expected, I used RTI as a source of cash in a falling market.
Ascent Industries: put in the original Cannabis Report Model Portfolio at $0.45 per share, ran up to $0.98 per share and sold for a healthy profit as their world collapsed into a regulatory disaster. Bought in the expectation that it was a great company with a solid combination of management and a business plan. Sold when management got caught selling illegal cannabis and eventually had their licenses revoked.
Canopy Growth: first recommended at around $10.00 per share, went to a high of over $75.00 per share and sold between $60.00 and $70.00 per share. Was a “core holding” for me based on Bruce Linton’s leadership of the company and the industry. When Bruce was fired, I sold the remaining balance and don’t expect to go back.
I don’t think I’m married to any stocks. In fact there are several others I have divorced in the past couple of years but I’m just trying to make a point. The stocks on the “married” list are actually the stocks I have chosen to, as my Italian friends might say, go to the mat for. These are five companies I am most confident investors will be pleased to own when the current cannabis bear market ends and prices begin to recover. But don’t be surprised if I add names to the list or even take names off depending on what happens in the future.
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