The Hidden Gem Of The Marijuana Industry

Feb. 28, 2014 12:48 PM ETCBIS, HEMP, ATTBF10 Comments
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Value, Contrarian, social theorist, perspective

Contributor Since 2014

I approach investing as a social theorist and a cultural historian. As a result, I am a contrarian. Studying the history of financialization, I have to agree with value investors like Seth Klarman, George Soros, and John Quiggin that markets are ultimately inefficient. However, I am not an orthodox value-investor. I believe in diversified strategy so as to insure maximum gains while maintaining a "margin of safety." Understanding that markets will operate inefficiently, I sometimes find "playing the greater fool's game" will yield nice short term gains. I have been investing for five years and have had proven results. I offer unique insight on fundamentals that most analysts do not consider. Cornelius Vanderbilt has done more than any other man to shape our idea of investing. He was the ultimate contrarian. As an investor he looked for both value and risk. His approach to markets is complex and contradictory but can be learned from. B.A., NYU Gallatin School M.A. CUNY Gradatuate Center [in progress] I started a twitter.

In previous posts, I have offered some words of caution to Pot-Stock investors. Since January 1st, marijuana stocks prices have skyrocketed. Many of them have also dropped dramatically. As most of these companies are still in development stage and/or penny stocks, speculation rather than value has been driving prices. Investing in pot-stocks for the last couple of months has therefore been merely a "greater fool's game."

That being said, an attractive opportunity has recently emerged in Canada's Abattis Bioceuticals Inc, (OTCQB:ATTBF) (CSE: ATT). There are several reasons why this could be an attractive play for investors.

Business Model

Abattis is a specialty biotechnology company with capabilities through its wholly owned subsidiaries of cultivating, licensing and marketing proprietary ingredients, biosimilar compounds, patented equipment and consulting services to medicinal markets in North America and Canada. The company is uniquely positioned to benefit from Canada's recent MMPR law, which allows for licensed producers to sell medical marijuana to registered patients.


Steve Forbes has argued that investing is first and foremost about people. In previous articles, I have warned investors that companies like Hemp (OTCPK:HEMP) and Cannabis Science (OTCPK:CBIS), while appearing attractive through their recent price spikes, are nonetheless run by managers who have been dumping their shares and diluting common stock to pay for their six figure salaries. Especially with pot-stocks that have limited information, sometimes the only litmus test is whether the managers are buying or selling, diluting or investing.

First the people:

Dr. Terence Fealey has over 30 years of experience of bioscience research in the consumer packaged goods industry. In particular, he acted as Vice President of corporate research and development of The Coca-Cola Company where he led the creation of The Coca-Cola's strategic technology platforms to support newly established global growth objectives. He also served as Senior Vice President of Global Food and Beverage Strategic Planning for Procter and Gamble Company. He was the Chief Innovative Officer and Senior Vice President of Martek Bioscience Corporation, which netted an annual 300 million in profits before being bought by Royal DSM NV for $1.09 Billion. He received his Ph.D. in inorganic chemistry from Georgetown University and his MBA from University of Chicago. He wrote his Ph.D. on Polymeric Ruthenium Ammines. Dr. Fealey's expertise and experience in both the biosciences and consumer products will be a watershed for the future of cannabis research and development. His presence on Abattis Biosciences should give potential and current investors confidence in the future of this company. In contrast, CBIS's president, Dr. Melamede, while knowledgeable, lacks sufficient experience to take his company to the next level. Amongst the various boards of directors within the pot-stock arena, Dr. Fealey proven record is unmatched. There has yet to be an entrepreneur within the marijuana bioceutical companies with the same level of experience as Dr. Fealey.

Mike Withrow is the CEO and President of Attabis. He has two decades of experience in financial markets, related technology and nutraceutical IP, formulation, and product development. As president of Abattis, he has recruited a stellar team. Although Abattis might be Mr. Withrow's first time running a publicly traded company, his vertically integrated business model of "Grow, Dry, Extract, Refine, and Sell" (GDERS) enables Abattis to streamline the process from botanical to product.

Raising Revenue and Shareholder Value

Unlike other players, Abattis is not issuing new shares to pay for its operations. Rather it has been giving incentivizing stock options to consultants and employees. Most recently, it has granted 110,000 stock options at an exercise price of .36, which is above the current trading price. Furthermore, the company has acquired from Green-Gro Garden Productions Ltd. (not to be confused with GRHN) certain valuable intellectual property relating to organic and hydroponic fertilizer formulas for 300,000 shares of Abattis.

This strategic usage of shares is a smart move. By issuing stock options at current stock price valuations and trading shares for intellectual property, Abattis is boosting its share value. These moves instill a collective incentive for the continual growth of shareholder value. Furthermore, it is using shares to acquire valuable assets, providing underlying equity. Whereas Dr. Melamede has been dumping his shares after making PR stunts for CBIS, Mr. Withrow is giving incentives to business partners and consultants to develop a profitable company.

Stay Cautious

"Most people get interested in stocks when everyone else is. The time to get interested is when no one else is. You can't buy what is popular and do well." - The Buffett

Even though this report might sound glowing, I caution potential investors from overestimating the future value of this company. The financial records are still spotty, which is to be expected from venture-capital bioceutical companies. This stock has seen a substantial increase in volume in the last few days. On Thursday February 27, 2014, ATTBF went from having an average share volume of 100,000 to 2 million. Additionally it went from having an average monetary volume of $30,000 to $600,000.

Abattis has a lot of potential to thrive as a vertically integrated bioceutical marijuana company. Unrealistic speculation could drive the price of the stock up past its underlying value and create unnecessary volatility. The point is to have the company grow in value and stay that way. So only buy ATTBF, as Buffet would say, if "you'd be perfectly happy to hold [it] if the market [were to] shut down for 10 years."

Disclosure: I am long ATTBF. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.

Additional disclosure: Although I have an incentive in the future value of this stock, I stress that I did not write this post to pump up investment.

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