Marijuana - Companies & Stocks

[Cbdpotential]

Derek Peterson began his career in 2000 at the brokerage firm Crowell, Weeden & Co. and had become a partner before moving to Wachovia, where he helped open and manage branches in Southern California and oversaw a portfolio that at one point reached $100 million. After several years, he moved on to Morgan Stanley, though by the time he got there, he was becoming disenchanted with the stock market and portfolio management.

Peterson says he was frustrated because he was entrusted to manage other people’s money, and yet he had no control over how management ran the companies in which he invested. And their financial condition was becoming increasingly harder to read. Even Wachovia surprised him, a publicly traded company with a good track record and a solid vision for the future, and yet investors woke up one morning to find out the bank’s balance sheet was falling apart and it was going to have to take a buyout or close up shop.


“When I’m putting those companies into portfolios for people, and I don’t have any control, I don’t have much confidence in what I’m putting out there,” he says.

That, combined with the quantitative funds and black pools and systematic trading that can move markets for reasons that have nothing to do with fundamentals, made Peterson yearn for something more fulfilling, where he had a broader measure of control.

“There was a paradigm shift: Stuff we thought was safe and secure, for people who want to allocate assets from a conservative standpoint, is no longer safe,” Peterson says. “The market has become a trader’s market, and I’ve always been more of a fundamentals person. Now you have good news that reacts poorly in the market and bad news that reacts well.”

He began looking at the fundamentals of the medical marijuana industry and found that while retailers like Target generate revenue of a few hundred dollars a square foot, and companies like Apple generate about $3,000 a square foot, medical marijuana enterprises bring in from $3,000 to $5,000 in revenue a square foot.

“That’s what really caught my eye,” he says.

He’d already felt for some time that he wanted to run his own business. He just wasn’t sure what that business was—until he saw that a friend who owned a medical marijuana business generated $18 million a year in revenue out of a building the size of a Starbucks. The business had an EBITA (earnings before interest, taxes and amortization) margin of 30% to 35%, Peterson says.

But the government was unreliable, allowing marijuana growers to prosper one minute and then cracking down on them the next. California approved medical marijuana use in 1996, but an effort to legalize marijuana for recreational use was put before voters in 2010 and failed.

In 2011, there were as many medical marijuana dispensaries as there were Starbucks, but a government crackdown led to many of them being shut down, Peterson says. To address the unpredictable nature of the market, he saw a niche in developing a line of products for hydroponic marijuana retailers that could easily be taken down and moved to another location in two or three minutes, if need be. He founded Terra Tech Corp., whose products include high-intensity lights and carbon filtration systems that get the marijuana odor out of the air. His company has since branched out into hydroponic produce, such as lettuce, basil, oregano, tarragon and mint. And one day, when more and more states legalize marijuana, he plans on developing large-scale, food-grade indoor marijuana facilities, where the product can be grown under controllable conditions, given that the people using it have immune systems that are compromised.

His company now generates about $7 million a year. It’s a far cry from the $400,000 a year and benefits he was earning in the financial sector, but he was so unhappy that he started his marijuana supply company before actually leaving Morgan Stanley. Once they found out, he was terminated.

“I could have gone to another firm, but I was at a point where I was straddling two worlds. We decided I had to be all in or all out,” Peterson says. He opted for the latter and gave up all of his brokerage and commodity licenses.

“It was a good living, but the real reason I walked away is that I just wasn’t happy or connected to what I was doing,” Peterson says.

http://www.fa-mag.com/news/new-journeys-20570.html

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