Infamous Trader Jason Spatafora tells us how he got rich playing penny pot stocks.

Florida-based stock trader Jason Spatafora became the Wolf of Weed Street in August of 2013. “I can pinpoint the exact day,” he tells me. “It was when former attorney general Eric Holder announced that the Department of Justice wouldn’t interfere with Colorado and Washington’s legal marijuana market.” Spatafora had already been trading, sinking his money into renewable energy, 3D printing, and cloud computing — “all the fads,” as he puts it. “Then, I found pot stocks.”

Spatafora has always lived by a progressive investment strategy: What will the world need in ten years? As legislation surrounding cannabis began to change in states like Colorado, California, and Washington, he became curious about the investment opportunities. He took a chance. “I had never invested in a penny stock in my life,” the former CEO of FBEC Worldwide Inc. recalls. “I put in $500 and two days later the stock had gone up by 50 percent. It was wild. Two days after that, it tanked.”

Despite the loss, Spatafora saw a future and was hooked. He began playing with penny pot stocks, making gains that shocked many of his contemporaries. He started a Twitter page to talk pot stocks (@WolfOfWeedST) and began tweeting out whatever the fuck came into his head as he studied the market. He built a following, and Rolling Stone, Men’s Journal, and the BBC covered him. He later bought marijuanastocks.com, and today it’s the most highly trafficked portal for cannabis investment education, posting daily articles, advice, and trade tips. He kind of kills the whole greedy-rotten-stock-broker stereotype. “It feels good to teach someone to fish,” the trader says. “My followers are what made me. If I turned my back on them, I would be a shithead.”

Although Spatafora made millions investing in penny stocks, he always reminds his followers that this requires research, diligence, and an eagle-eyed obsessiveness for watching the daily ebbs and flows of the market. “The stock market is not a magic ATM where you put money in and more money comes out,” he says. If it was, we’d all be filthy rich. Here’s more of my conversation with the Weed Street Wolf.

Where do I even start when investing in cannabis stocks?

Don’t put in what you are afraid to lose. Don’t gamble with your rent money or mortgage. [The cannabis] sector is so young. We are only getting through the first inning. Whenever I talk to people, I ask how many of them invested in real estate before 2004. Then I ask how many people they think invested in alcohol after Prohibition ended in 1934. Crickets. Cannabis is a once-in-a-lifetime investment opportunity and if you are smart about it, you can do very well. If you are gambling, and not being responsible or diligent, you will sour really quick.

Local and federal legislation must be a huge factor.

Of course. Know the laws! You also have to remember that investing in the cannabis industry is different in the United States than in Canada. We don’t know what’s going to happen in the U.S. The political climate right now is too nuts. Canada, on the other hand, is a legal medical market that is looking to go fully recreational. A lot of these [Canadian cannabis] companies are dually listed on both Canadian and U.S. stock exchanges.

Any Canadian companies you’re excited about?

What really has me excited is that there are many big-pharma executives who are leaving that industry to move into cannabis. A company I’m really excited about is Emblem. One of the founders is John Stewart, former CEO of Purdue Pharma, one of the largest privately owned pharmaceutical companies in the world. Purdue created OxyContin, MS Contin, and Biphentin, among many other drugs. Stewart started studying cannabis and left Purdue knowing that weed would be the future. Emblem could become Canada’s GW Pharma. When you’re investing in companies like this, you have to bet on the jockey, not the horse. When I see a CEO with an incredibly successful track record like Stewart leave his cushy job in big pharma to work in cannabis, that tells me something big. Come on. I see Emblem as a no-brainer.

It’s a Schedule 1 drug in the U.S. and the government owns the patents to medical cannabis. Should that worry me?

Look at investing in Canadian cannabis companies as long-term investing. “Long-term” in Canada could mean four years. I have 2,500 shares of my IRA in Emblem. I feel safe with that. Look, I think that with the consensus shifting [about cannabis] and because it’s still so early in the game, you do not need to invest right away. You should stay aware and keep learning, then jump in when you’re ready. People always say to me, “I have $10,000, what should I invest in?” I am never going to tell someone what to invest in. I suggest that you practice with fake money. Pick some companies, write down your investments, and watch the stocks. Fake-trade them for a month. Make mistakes with play money before you start investing real cash. I’ve seen people do the dumbest things. I had a friend who was up a million dollars on a pot stock. I told him to sell. He thought it would keep going up, and he ended up wrong. Can you imagine?

Losing that much money in an instant? Hell, no!

It’s happened to me. I put $4,000 into a stock once, a million shares at half a penny, and in three months the stock rose to 45 cents. I asked a lawyer friend of mine out to lunch that day, and I was checking my stock throughout the meal. It was staying put. It was all good. Then, all of a sudden, my phone starts going off with alerts. The stock dropped 20 cents. I lost $200,000 because I wasn’t paying attention. I’m not right all the time. I’ve made mistakes and bad predictions. If I was right all the time, I would be worth billions, not millions. I just need to be right more than I’m wrong. It’s all about mitigating risk. If I can make $2,000 a week trading, then I’m happy. That’s just gravy.

Tips for people interested in investing in cannabis stocks?

You have to know the laws that vertical is tied to. What that means is that if they are growing weed in a certain state, know the restrictions of that state. How hard is it for this [company’s] product to go to market? What is the company’s plan for merging their product out of state? You must know the legalities and compliance issues that surround that. The first thing you should always do is use Google. I would always type in the CEO’s name and write “scam” or “fraud” after it. See what comes up. Check when the LLC started. Call up dispensaries and ask if they carry the product. Do some guerrilla investigation. That’s how I started. I found some of the biggest companies who created those massive gains for me. Lastly, you can’t be greedy. You see your stock go up 30 percent? Take it. I’m not saying take it all, but take the principle. Remember, there is always going to be another company. The more you’re used to taking profits, the easier it will be. No one goes broke taking profits.

Interesting.

People love drinking the Kool-Aid. They love to think that they just invested in the new Amazon. The reality is that 99 percent of these companies are going to fail. If you’re investing in the United States [cannabis industry] you should be looking at companies that offer support to the cannabis industry, not companies that are trying to have a grow if they ever get a license in their state. The best companies to invest in would be ones that make things such as LED lights, the bags the weed goes into, or nutrients required for growing. Scotts Miracle-Gro went from $65 a share to $90, all because they teamed up with a company that worked with hydroponics.

Another rule: People think they make money when they sell, but realistically, you make money when you buy. Don’t chase a stock. As soon as you hear about a stock, don’t buy it because you are buying someone else’s shares. Wait. Next rule: If you go down 10 to 15 percent, get rid of it. Thinking it will go back up is probably wrong. You’ll get killed. You have to preserve your capital. The name of the game is mitigating risk.