April 2015

TheCROW’SNEST

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I have to let you in on a secret: I hate selling stocks.

I love researching them and buying them, but I simply cannot stand hemming and hawing over my portfolio each and every day, trying to decide what to swap out of my holdings. It takes up far too much time and — frankly — I have better things to do...

Like enjoy my life.

I’d much prefer to take my kids hiking, travel around Europe, or even have a couple of beers and heckle strangers at a baseball game. If I’m being totally honest, I would rather mow my lawn than agonize over whether or not to sell some whipsawing small-cap stock. In fact, there are so many things I’d rather do than watch the market that I have set up my portfolio to make sure I have enough free time to enjoy — and pay for — the sheer enjoyment of life itself.

That’s why I finance all of my fun and adventures with dividend-paying income stocks.

On one hand, I’m what some may call a lazy investor, and being “lazy” has paid off for me time and time again. But I just found out about a fund that makes my lazy portfolio look downright aggressive. This fund has taken the buy-and-hold philosophy to the most extreme lengths I have ever seen.

This fund hasn’t bought a new stock in 80 years. You read that right: 80 years of holding the same basket of stocks.

And it is still crushing the market to this day...

The Voya Corporate Leaders Trust Fund has been riding the same basket of stocks since 1935!

It hasn’t bought a stock since the Dust Bowl, for crying out loud. To put that in perspective, Voya has not added a position to its portfolio since:

• The Hoover Dam was completed

• The Hindenburg went down in flames

• Elvis was born

• FDR was reelected

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How’s that for patience? It figures that if it ain’t broke, don’t fix it, and boy I’ll eat my hat if it’s not the most interesting “gone fishin’” portfolio I’ve ever seen.

Voya currently operates a portfolio of 21 stocks.

There are a slew of blue-chip giants in its portfolio: General Electric, Procter and Gamble, Honeywell, and DuPont. There are also some remnants of companies that no longer exist, or have morphed into other companies. For example, it bought Standard Oil, which was broken up into Exxon and Chevron.

These antiquated investments have paid off in spades. Just have a look at this chart:

Not too bad for a lazy portfolio...

All told, it has outperformed a whopping 98% of its large value-fund peers over the past 10 years. It has averaged 17.3% in the last five years and 9.4% over the last 10.

This strategy has been the core of Warren Buffett’s method over the years, and the Voya Corporate Leaders Trust has drawn praise from the father of low-cost index funds Jack Vogle, who has been familiar with Voya since the 1950s.

“It’s not a bad idea at all,” he said.

It certainly isn’t — if you pick the right stocks. You see, when investors trade too often, they incur the brokerage commission fees and the short-term capital gains taxes anchored to the aggressive trader. Brokers want you to trade more. Your 401(k) custodians trade more and charge you to do so. But in the end, all that overtrading does is cost investors money and force them into bad decisions...

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In a study of investment brokerages, two researchers at the Dongling School of Economics and Management in Beijing found that the annual return for overtraders was 11.4%, while the average market return was almost 18%.

Another study out of the University of California found that 20% of investors who traded most actively earned an average net annual return 5.5% lower than those who kept their moves to a minimum.

That shows overtrading can indeed hurt your overall returns, or at the very least all of that extra work (and extra trading fees) doesn’t add to your bottom line.

So, it pays to do your research and stick to a portfolio of strong stocks you plan to hold for some time.

But you cannot just throw darts at a list of blue-chip dividend companies and hope for the best. You need to boil down exactly which companies have the staying power to keep rewarding shareholders for the next 80 years. That’s why I’m so high on “dividend aristocrats”...

Dividend aristocrats are the rare breed of stocks that have done so well over long periods of time that they have been able to raise their dividend each and every year for at least 25 years. That is the kind of staying power that is absolutely crucial for a lazy, buy-and-hold portfolio.

In the last decade, these dividend aristocrats have returned an outrageous 183% — almost double the return of the S&P 500.

In short, you could conceivably hold them for 80 years if you’d like. Plus, if you choose a basket of these stocks, you can be sure you’ll continue to get checks in the mail several times a month.

And that can add up to some serious fun money.

The best part? You get to enjoy your life. And you really cannot put a price on that...

A rolling stone gathers no moss, to use a tired phrase, and as an investor, I want my positions covered in moss — or compound interest. If you are a new reader, please read our report on dividend aristocrats for more information on the strategy. I’ll be providing updates to all of those positions in this issue...

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Also in this issue:

• The marijuana industry is heating up more and more every month. We’ll bring you two new Delta-9 plays in the Plundering section.

• A robust update on Newtek Business Services.

• A rundown of our dividend positions.

• With warm weather coming up fast, we’ll bring you some common-sense tips on keeping your electricity bill low during the hot months in the Plugging the Leaks section.

Let’s get to it...

Charting the Course

Newtek Business Services (NASDAQ: NEWT)

I’ve gotten a lot of questions regarding Newtek’s dividend and recent share price movement. To make sure we’re all on the same page, here is an update that specifically focuses on these issues.

The first ex-dividend date just passed last week. This means anyone holding shares will receive a dividend of $0.39 in cash, representing a 9% yield at current share prices.

This money will be yours — just not quite yet. The ex-dividend date is simply the cutoff date, and companies have some time to actually pay you.

Normally, it is around a couple weeks, and Newtek is sticking close to this, with the dividend payments transferring to shareholder accounts on April 13, 2015.

Currently, the estimated 2015 total dividend per share is $1.81. At current share prices, this would represent an extra $1.42 per share over the next nine months for a total yield of 10.6%.

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Buy the Dip

After the ex-dividend date, we saw a number of investors cashing out on increased volume.

Part of this is the strong share price movement so far this year (up just under 15%) and something that will happen every quarter for high-yield stocks.

With such large dividends, there is a strong incentive for investors to wait through the ex-dividend date to make sure they collect a bit more before moving on.

We’ll see share prices naturally rise as the next ex-dividend date comes in June. Then we’ll see another drop as cash for the dividends comes out of the books and some investors move on.

Do not get too jittery here. We are holding Newtek shares to get paid through the entire year.

If you add the $1.81 estimated regular dividend with the $4.50 special dividend that will come later this year, you’re looking at a 37% return in year one at a $17.05 share price.

The overall trend we’re capitalizing on remains great.

Newtek is expanding loan operations and will reap the rewards of removing the large corporate tax burden that ate into profits in the past.

In 2014, Newtek originated $203.3 million of loans itself, an increase of 13.7%, with an estimated $53 million in loans in Q1 2015, representing a 16% increase year to year.

The company expects to originate between $240 million and $280 million in loans in 2015, which could represent an increase of up to 29% compared to 2014.

With this growth, the share price will have an overall upward trend through the year that includes some temporary dips from the cyclical quarterly behavior of other investors.

Know the Floor

I know it isn’t easy to see shares you’re holding drop like they have, but there is a hard floor that will always support share prices.

Net asset value is what we’re looking at here. It is as simple as it sounds: Add up all of Newtek’s assets, and you get a number. This is the true value of the company, mutual fund,

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ETF, or REIT for that day.

Something has to go seriously wrong for a BDC like Newtek, an ETF, or a mutual fund to go below NAV for any significant amount of time, and we haven’t seen shares do it yet.

This floor will continue to rise for Newtek throughout the year as assets grow. In fact, it has been rising at an increasing rate.

This is the number one reason why I strongly believe we will see a short-term sell-off after each dividend but maintain an overall upward trend in share prices through at least the end of 2015.

There is a hard floor on what Newtek is worth, and it is steadily increasing all the time.

We’re sticking with a buy-under price of $19.00 for shares, and we’re going to milk this for all of the dividend income Newtek is legally required to give to shareholders.

I will be covering Newtek in the months leading up to the special dividend announcement, so make sure you read all of the issues going forward for guidance.

Aqua America (NYSE: WTR)

It’s been a while since we’ve talked about our position in Aqua America Inc. (NYSE: WTR).

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Like the broader market, the stock is essentially flat for the year. However, this has been a profitable utility position for us, considering we are up 15% on the position and have been collecting a nice ~2.4% yield.

Combined, we’re up 25% on the trade, with 10% already in our pockets or reinvested.

Year-end results were released through a 10-K form in mid-February, and everything looked good. Income and revenue continued their upward trends, dividend payments increased by 9%, and the cost of long-term debt continued to go down:

The company completed 16 acquisitions for the year and grew the customer base by 1.3%.

2014 marked the 15th straight year of record earnings with a year-to-year 5.4% increase to $2.33 per share.

Cap expenditure for the year came out to 3.29%, 0.04% higher than the target. Over the next three years, Aqua America expects to spend approximately $1 billion in capital, so we should see consistent growth that boosts dividends and share prices going forward.

Cash generation exceeded capital spending, and the company expects the same to happen in 2015. With this trend in place, there is no foreseeable need for new equity for years to come.

In fact, the company bought back 560,000 shares during the year to avoid dilution from

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management equity programs.

One thing of note that doesn’t have anything to do with the company’s financials involves the current CEO.

Nick DeBenedictis has led the company for over 20 years and will be retiring as CEO after his contract expires on June 30th.

During the conference call, he reassured everyone about his succession plan. The company fully expects to name a new CEO before he retires, and he plans on keeping his Chairman position on the board for the foreseeable future.

Unexpected or poorly executed management plans make investors skittish, but we shouldn’t expect to see any sell-offs as a result of this transition.

Six sell-side analysts covering the stock have recently released reports, giving a mean target price of $29.416 and a buy/outperform rating.

Looking at the next three to five years, the long-term earnings-per-share estimate growth rate for the company is 5.33% based on three analysts providing projections.

To sum it up, Aqua America is chugging along and looking healthy. The company will remain a source of low-risk, stable growth and dividend income for us for quite some time.

The buy-under price for shares in our portfolio is $28, so we’re currently holding and reinvesting dividends.

The company offers a generous 5% discount through its reinvestment program, so if you intend to increase your position over time, I highly suggest you take advantage of it.

The next dividend will be announced in early May, with the ex-dividend date around the middle of May, so we have about a month before we know what we’ll be paid and about two months before it is handed over to us.

Key figures:

Market Cap: $4.72 billion

P/E Ratio: 20.38

Dividend Yield: 2.5%

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Earnings Per Share: $1.31

52-Week Range: $23.12 - $28.22

We’re buying as a long-term DRIP under $28 for now. Information on this dividend reinvestment program may be found here.

AbbVie (NYSE: ABBV)

AbbVie is chugging along. In spite of share price movements up and down, we’ve seen about a 5% to 6% gain since the March issue and just under a 9% gain since we initially entered the position in September.

Current share prices are great for new positions for those that haven’t yet invested and present a greater dollar-cost averaging opportunity for those that want to build up their positions.

Recently, there has been a drop in short interest of about 2.5% to 1.2% of floated shares. This could just be noise, but it also shows that the market sees less downside risk for the company.

Here is some recent noteworthy news:

In case you missed it, AbbVie acquired Pharmacyclics, Inc. for $21 billion, giving AbbVie access to the multibillion-dollar blood cancer market with its Imbruvica drug. The deal should wrap up after Q2 2015.

A couple days after the March issue, AbbVie announced that it entered into an exclusive worldwide license agreement with C2N Diagnostics, a privately held protein diagnostic and therapeutic discovery company.

Together, the companies will develop and commercialize a portfolio of anti-tau protein antibodies for the treatment of Alzheimer’s disease and other neurological disorders. The build-up of altered tau proteins is a leading indicator for a variety of these conditions, and a breakthrough in anti-tau antibodies could slow or potentially halt degeneration.

The terms of the deal were not disclosed, and it’ll be a while before any meaningful news comes from this agreement, but it adds another promising — and potentially lucrative — project to the pipeline.

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The company also asked an Illinois federal judge on April 3 to dismiss a lawsuit that claims AbbVie misrepresented the importance of tax incentives for its $55 billion merger with Shire that fell apart last year.

The lawsuit is pretty frivolous considering:

• AbbVie was up-front about this and always listed the tax structure changes as a reason for the proposed merger.

• Many of these shareholders jumped in late, drove the share price way up on a controversial merger, then started crying about it when their risky bet didn’t go as planned.

• Current Shire share prices are close to where they were while the merger was still proceeding, meaning shareholders held shares because they wanted to own a part of the company and weren’t chasing a quick buck have largely recouped paper losses.

It may take some time, but this lawsuit will die a quiet death like so many others and should have no effect on AbbVie share prices going forward.

The European Commission just approved marketing of Humira to children ages 4 and up with severe chronic plaque psoriasis. The Humira patent will not expire until 2018 in the EU. While this won’t add a whole lot to revenue and profits, it’ll provide a previously unexpected bump to sales for several years.

In other regulatory news, the FDA refused to accept fast-tracked approval of a Merck 2 drug therapy for hepatitis C, leaving AbbVie and Gilead with the only two serious contenders. Gilead has the advantage of introducing its drugs first and having captured most of the market, but AbbVie’s Viekira Pak is cheaper and is being aggressively marketed.

The latest prescription data compiled by Bloomberg Intelligence suggests that the prescriptions for Gilead’s Harvoni grew 6%, while AbbVie’s Viekira Pak grew 52% for the week ending March 13.

The next big news day that we can anticipate will be quarterly earnings information at the end of April.

Analyst consensus expects earnings per share to come in around $0.84, which would be $0.05 less than the figure for last quarter. Of course, back then, analysts collectively expected $0.77, and AbbVie crushed it with $0.89. Hopefully we get another EPS announcement that tops expectations.

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In spite of some skeptics, AbbVie has a lot going for it and is poised for a slew of positive catalysts this year. We’re going to keep holding this stock for a while and capitalize on upward trends and the 3.2% dividend yield.

The next ex-dividend date is April 13, with a payment date of June 15. We’re getting $0.51 per share, up 4% from the $0.49 we got last quarter.

We’re buying AbbVie as a long-term dividend position under $65. I would recommend adding it as a DRIP, which you can do here.

Key figures:

Market Cap: $93.46 billion

P/E Ratio: 53.30

Dividend Yield: 3.6%

Earnings Per Share: $1.10

52-Week Range: $45.50 - $70.76

HCP (NYSE: HCP)

Health Care Property Investors, or HCP, Inc., has a couple unique advantages that make it a perfect candidate for a long-term investment.

HCP, Inc. is a fully integrated real estate investment trust (REIT) that focuses on real estate for the domestic health care industry. In particular, the company’s portfolio of assets is diversified among five distinct sectors: senior housing, post-acute/skilled nursing, life science, medical offices, and hospitals.

REITs, if you are unfamiliar with them, utilize a unique company structure with massive tax advantages.

A REIT is a company that owns and, in most cases, operates income-producing real estate. The real estate can be anything from office and apartment buildings to warehouses, hospitals, shopping centers, hotels, and even timberlands.

The whole idea is to give all investors the opportunity to invest in large-scale, diversified portfolios of income-producing real estate — not just the extremely wealthy.

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To do this, REITs were designed with a structure similar to mutual funds and can be easily purchased like any other liquid securities.

To qualify as a REIT, a company needs to meet these criteria:

• Invest at least 75% of its total assets in real estate

• Derive at least 75% of its gross income from rents from real property, interest on mortgages, financing real property, or from sales of real estate

• Pay at least 90% of its taxable income in the form of shareholder dividends each year

• Be an entity that is taxable as a corporation

• Be managed by a board of directors or trustees

• Have a minimum of 100 shareholders

HCP is the only REIT in the dividend aristocrats list.

Here’s the latest on the stock:

HCP raised its quarterly cash dividend to $0.565 per share, or $2.26 annually, which works out to a yield of around 5.4% — pretty generous. That is a 3.7% increase over the previous dividend and represented the 30th year in a row that the company’s increased its dividend — hence the dividend aristocrat tag.

The stock should continue to climb, along with its dividend payouts, as HCP continues to make expansions and invest in other assets:

• HCP has recently invested $630 million to finance an acquisition of NHP, a company that owned 273 nursing and residential care homes representing over 12,500 beds in the UK. That investment is projected to yield around 8.2% over its five-year maturity.

• HCP acquired three care homes leased for $20 million and three medical office buildings for $51 million.

• HCP funded $112 million for construction and other capital projects in its life science, medical office, and senior housing segments.

These investments should pay off and add to earnings growth.

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The company is also breaking ground on its massive life science development center, dubbed The Cove at Oyster Point in San Francisco. The project could amount to 884,000 square feet spread over 20 acres. It will house seven labs and office buildings, a hotel, and ground-floor retail establishments.

The move seems well timed. Biz Journal reports that over 20 Bay Area life sciences companies have gone public in the past 13 months, raising over $1.5 billion, and lab and research and development vacancy rates are below 1%.

In other words, The Cove should have plenty of people to rent to with little risk of vacancy. HCP has a great track record where that is concerned, having recently achieved an all-time high occupancy of 95.2% in its life science segment.

Here are some more promising figures from the latest financial report:

• The revenue for the last quarter (Q4) was $603.5 million, up by 13.8%.

• HCP reported adjusted funds from operations (FFO) of $0.79 per share, which beat the consensus estimate of $0.77.

• It has shown revenue growth of 4% year over year (YoY).

Key figures:

Market Cap: $20.3 billion

P/E Ratio: 21.95

Dividend Yield: 5.1%

Earnings Per Share: $2.01

52-Week Range: $38.34 - $49.61

DIVIDEND PAY DATES: The dividend has an ex-dividend date of February 5th and a pay date of February 24, 2015. We’ll update you when the company announces the next dividend, which should be any day now.

You can enroll in the dividend reinvestment program here.

We’re buying HCP as a long-term position under $48.

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Plundering

Our Delta-9 positions have done quite well for us... so well, in fact, that I get letters almost daily asking for more marijuana companies to recommend.

As I have said in the past, this is a very volatile industry. I’m not expecting all of the producers and companies to make it over the next year or two. However, the ones that do will be perfectly aligned for gains the likes of which I’ve never really seen.

The big money has already started to stack up behind both recreational and medical marijuana.

As I told you in January, PayPal founder and famed venture capitalist Peter Thiel sank $75 million into the space by investing in Privateer Holdings — a Seattle-based company that has large investments in several marijuana-related enterprises.

Thiel’s Founder’s Fund has been in on the ground floor of many other disruptive and wildly profitable sectors like Facebook, Spotify, and Airbnb. It’s safe to say that he knows an emerging industry when he sees it...

And the marijuana industry is going to be simply massive.

Here’s why the stars are aligning for marijuana right now... and why you should get on board before the next billionaire dumps a ton of money into the sector.

Privateer Holdings currently operates three large companies in the marijuana space.

It operates Canadian medical marijuana producer Tilray, which is a mail-order business for medical marijuana companies in Canada — where medical marijuana regulations are much more relaxed than here in the U.S. Last year alone, it unloaded 35,000 shipments of marijuana.

Privateer also holds Leafly, the world’s largest resource for information about both medical and recreational cannabis. Leafly allows you to explore different cannabis strains for their medical effectiveness, flavors, and overall quality — much like an Angie’s List or Yelp for marijuana.

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Leafly is hugely popular in the space: It averages over 4 million monthly visitors to the website. It expects to be profitable by next year.

Now, while both of those companies operate in the medical marijuana space, Privateer is positioning itself for the widespread legalization of recreational use as well.

And right now — especially in the recreational markets — it’s the Wild West out there. If early investors place the right bets, they’ll be rewarded with one of the biggest growth markets in the recent history of investing.

“There are no standards, no leaders, no significant brands — we’re at the point where the industry is being ‘productized,’ where suddenly someone buying cannabis might begin seeing it packaged nicely, in a way that implies safety, consistency and quality. That’s a big leap from buying something in a Ziploc bag,” noted co-founder and CEO of Privateer Brendan Kennedy.

I’ll say...

Here’s how Privateer Holdings co-founder and Chief Financial Officer Michael Blue explains the industry growth:

Since we announced that Founders Fund made the first institutional investment in the cannabis industry in January, we’ve seen the profile of our investor base change in ways that would have been unthinkable five years ago when we set out to transform this industry

We closed the Series B round with a group of sophisticated family offices and institutional investors who made seven- and eight-figure investments. That’s a vote of confidence for the entire industry and an important step forward in finally ending cannabis prohibition.

That round of financing has closed now, after raising $75 million in series B funding — the largest private capital fund raising the industry has ever seen. All told, the start-up has raised over $82 million and doesn’t look to be slowing down anytime soon.

“This is the fastest-growing industry in America,’’ according to Troy Dayton, CEO of ArcView Group. “Despite all the stigma, people are recognizing this could be the next great American industry.’’

ArcView is a research and investment firm focused on “canna-business.”

It just released a market study that found a 74% increase in marijuana sales in the U.S. from 2013 to 2014. That massive jump is due primarily to legalization in Colorado and

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Washington. This will continue. In fact, next year Oregon and Alaska will start selling legal pot — and many more will follow.

Another factor is more relaxed regulations regarding medical marijuana. While only a couple states have outright legalized it, 23 states have already approved medical marijuana. Medicinal marijuana sales in California alone could account for nearly half of a $2.7 billion market.

ArcView is predicting that market will swell to $10 billion in five years’ time...

Now, that is an impressive number, but when marijuana is totally legalized and destigmatized, ArcView expects it to become a $100 billion to $200 billion-a-year business.

So, where do you put your money?

New Picks

Well, I’ve recommended three marijuana plays: Insys (which we sold half for 81% gains last month), T-Bird Pharma, and AbbVie. I gave you an AbbVie update above and robust updates on T-Bird and Insys in last month’s issue (which you can read here). Not much has changed, so you can look forward to another update on those positions next month.

In the meantime, I have been flooded with requests for more marijuana stock recommendations and coverage.

Now, this is a long-term, dividend-focused newsletter, and I really don’t like having too many small-caps and volatile stocks in the portfolio. But since so many of you have been clamoring for more pot stocks, I have reached out to a handful of companies to try and decipher who really has the best chance of blowing the roof off of this budding market.

I have found two that I think hold potential for success, but be warned: these are very small, speculative companies. They are the very definition of high-risk, high-reward type of investments. In other words, do not risk any more than you are willing to lose.

That being said, this month, I’m going to bring you two new companies to keep your eye on: OrganiGram and InMed Pharmaceuticals.

I’ve had extensive conversations with both companies and feel comfortable bringing you the details of each.

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OrganiGram (TSX-V: OGI) (OTCQB: OGRMF)

I had the pleasure of speaking with investor relations for OrganiGram, another upstart Canadian medical marijuana company located in Moncton, New Brunswick. OrganiGram is a commercial producer of medical marijuana, focusing on producing high-quality, condition-specific medical marijuana for patients in Canada.

It has a great setup going on, and the operation is coming together fast.

It has a market cap of $28.06 million, and its stock has a 52-week range of $.10 all the way to $2.40. It has also raised $8,500,000 in capital investment.

Here’s the rundown of expected revenue and patient growth:

Right now, OrganiGram is offering a range of six strains and may eventually offer up to 16.

It’ll most likely offer $6 to $7 per gram for “basic” medical marijuana, while the premium strains will sell for $12. Like I mentioned, that is a rarer strain that is used for serious medical conditions without the psychoactive “high” of others.

Its marijuana is:

• Issued from Organic Cannabis plants as certified by Ecocert Canada

• Dried and cured for optimal quality

• Not treated with gamma irradiation or cold pasteurization

• Not subjected to synthetic nutrients or pesticides

• $6 to $12 per gram

OrganiGram just announced it has completed the first harvest from one of its three newly constructed grow rooms approved by Health Canada in December. This allowed

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OrganiGram to significantly increase production and add more marijuana strains to its product line. Furthermore, it has increased its registered patient list by 250%.

The new rooms have led to expectations that it will double its active patients.

One issue these medical marijuana providers have is producing the right amount of marijuana to fulfill their client base. They cannot onboard more customers than they have product to ship them. That’s a big plus about OrganiGram — it has reached an agreement to unload its product.

It recently licensed a deal with Canada’s Trauma Healing Centers to help treat PTSD. While the clinic itself does not touch the marijuana, it will prescribe it to patients, which is where OrganiGram comes in. It is developing a strain of marijuana that specifically treats these type of symptoms.

Here’s the press release that explains the arrangement:

Under the terms of the LOI (letter of intent), OrganiGram will produce the specified strains of medical marijuana requested by Trauma Healing Centers to treat its patients suffering from Post-Traumatic Stress Disorder (“PTSD”). The LOI commits OrganiGram to provide up to 1,500 kilograms of medical marijuana specifically for Trauma Healing Centers’ patients in 2015, increasing to 3,000 kilograms in 2016 and by 20% each year thereafter. The LOI covers a term of 10 years with an option to extend by 5 years at the end of the initial term.

In addition, OrganiGram has agreed to collaborate with Trauma Healing Centers to conduct research related to PTSD and the use of medical marijuana for treatment.

“We are extremely happy to finally be cementing this long-term relationship with Trauma Healing Centers. The services Trauma Healing Centers provides to Canadian Veterans and First Responders is extremely important and we are proud to be in a position to assist in their mission,” said Denis Arsenault, Chairman & CEO of OrganiGram.

Trauma Healing Centers is in the process of opening 13 centers across Canada. The first 4 centers are scheduled to open in Edmonton, Ottawa, Quebec and Halifax Region in January 2015. An additional 9 centers are scheduled to open across Canada by June 2015.

“Securing a consistent supply of the highest quality medicine for our patients is a vital part to the services we provide at Trauma Healing Centers. We are

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pleased that OrganiGram has guaranteed an ongoing supply of medicine for our patients and we look forward to a long and successful partnership,” said Kyle Atkinson, President of Trauma Healing Centers.

It’s a huge opportunity to provide life-changing medication to consumers, and also a built in 15-16,000 marijuana customers to start unloading its product to. The deal guarantees 1,500 kilos of marijuana. The average prescription for these patients is 10 grams a day — the largest I’ve ever seen.

Much of that has to do with the nature of PTSD. The symptoms are active all day, so they require a constant dose.

Here’s the breakdown of the deal from Stockhouse:

The math on this is simple: OrganiGram, even if they sell at a conservative $5 per gram, could sell 3 million grams just in 2016 alone, for $15m in revenue.

In 2015? $7.5 million.

This on top of its ongoing business.

In short, it will be moving a good deal of product compared to other companies I’ve seen.

It already has a waiting list of over 1,000 patients, so on top of the Trauma Healing Centers, it is really set to break out.

Many of its competitors have raced to onboard patients before they could actually fill the orders — they could deliver the first order, but had to backorder after that came through. So what you have is a slew of angry patients who are not being fulfilled and will move their business elsewhere.

That’s something OrganiGram wants to avoid.

For every patient it onboards, it has three months worth of supply to make sure it builds up happy patients who can have their orders fulfilled. It’s always terrible to go on backorder, but when you have a medical condition, imagine having to wait an extra month for your medications.

I think OrganiGram is doing this the right way and has a ton of upside as it starts moving more and more product.

Now, being that this is a $0.56 stock, you can tell this is far from the dividend-paying blue

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chips that I typically stick to, but I believe that there is simply too much upside to ignore the opportunity.

Again, this is another high-risk opportunity in the marijuana space. I wouldn’t risk any money you cannot afford to lose. As you can see from this chart, this has been volatile. But if you had timed it right you could have doubled your money several times over.

You can view its investor presentation here.

If you have further questions about the company, you may feel free to contact Investor Relations Director Brett Allan by email at brett@organigram.ca or by phone at 416-907-4148, and he will be happy to answer any outstanding questions you may have.

I’ll be covering OrganiGram more closely in issues to come.

InMed (CSE: IN) (OTC: IMLFF)

InMed Pharmaceuticals is a clinical-stage biopharmaceutical company that specializes in developing cannabis-based therapies through the Research and Development into the extensive pharmacology of cannabinoids coupled with innovative drug delivery systems.

This is a very, very interesting company. It is taking on the medial marijuana sector from a very unique angle: decoding Big Pharma drugs and replacing them with cannabis-based

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medicines.

You see, InMed has a proprietary “Platform Technology” that can actually identify and uncover certain compounds from pharmaceuticals and cannabis plants and match them up to create new medications for specific diseases.

Its platform is called the Intelligent Cannabinoid Drug Design Platform or IDP. InMed says it is a “bioinformatics tool/ algorithm that identifies individual chemical compounds from the cannabis and non-cannabis plants.”

Essentially, it acts as a decoder of very complex compounds and allows the InMed scientists to create new therapies and medicines based on these identifications.

Imagine running an arthritis drug like Humira through the IDP and identifying the active compounds that make that drug effective, then running similar tests with cannabis-based compounds and creating a sort of Venn diagram where there is common ground.

They can then take that information and create a new treatment or medication based on the results. And these aren’t simply one-target drugs. InMed seeks to create “intelligent drugs” that could work for multiple targets instead of the “one drug for each ailment” type of treatment that we’re so used to these days.

Imagine — hypothetically — taking one cannabis-based drug that fights inflammation, heart disease, and arthritis, for instance.

This company has shown the most scientific prowess of any I’ve covered in The Crow’s Nest and takes the art of medical marijuana into the future. I spoke with its Chief Scientific Officer, Dr. Sazzad Hossain, and he impressed me with some of the techniques the company is using.

The IDP also boasts some serious, tangible benefits compared to current research.

It could shave off years of drug development. By targeting “disease linkage intervals with protein identification & interactions with known disease genes networks,” InMed suggests that it can take the average 10- to 15-year life cycle of bringing a drug to market and slash that to around three to five years.

If it is successful in harnessing this technology, that would amount to a serious change in the way companies develop any drug — and especially those cannabis-based treatments.

It is currently focusing its technology on three main areas: glaucoma, arthritis, and a rare

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skin disorder called Epidermolysis bullosa simplex (EBS).

Let’s unpack each of these projects:

Glaucoma

Glaucoma is a very frightening eye disease... when you get it, it can feel like your vision is closing in on you day after day. It is the second leading cause of blindness in the U.S. and currently affects over 3 million Americans and over 60 million worldwide.

Without breakthroughs like InMed is working on, that figure could jump to 80 million by 2020.

The treatment market for glaucoma is $4.5 billion.

Most of the treatments require users to place drops into their eyes several times a day. This is an annoying procedure and can be difficult for older sufferers since you need steady hands in order to apply the medications.

These factors have led to a whopping 50% of glaucoma sufferers abandoning their treatments.

InMed is developing a cannabinoid treatment for the disease, where instead of having to delicately apply drops several times a day, you’d simply wipe a dap of a gel into the corner of your eye. It refers to it as its Proprietary Nanoparticle Delivery System.

The compound, named CTI-085, is going through phase I trials now.

Arthritis

Arthritis is one of the most prevalent diseases in the world. It is the single leading cause of disability in the U.S.

• By 2030, an estimated 73 million North Americans will have arthritis, unless the trend is reversed.

• Arthritis drugs brought an estimated $35 billion in profits in 2013.

• Analysts forecast the arthritis drugs market will grow at a CAGR of 4.09% over the period 2014-2018.

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Humira, which I’ve covered above in the AbbVie update, is the single biggest drug in the world. But it also has a slew of side effects. If InMed can come up with a safer and side effect-free treatment for arthritis, it would be a game changer not only for marijuana-based medicine but for medicine as a whole.

Its mixture of both cannabinoids and non-cannabis-based ingredients are designed to relieve both joint pain and the swelling and inflammation that causes it.

The compound, named CTI-091, is going through phase I trials now.

InMed is also poised to add five to nine new assets to its pipeline this year.

The Team

InMed sports a pretty impressive team of experts:

Dr. Ado Mohammed, MD, DPM, MFPM Chief Medical Officer

Dr. Mohammed is a proven leader in the development of cannabinoid therapies, having played a strategic role in the clinical development, R&D, and commercialization of these specialty drugs. His previous position was Associate Medical Director at GW Pharmaceuticals, a UK-based Pharmaceutical Company specializing in the development of cannabinoid-based prescription medicines. In this role and others at GW Pharmaceuticals, Dr. Mohammed was involved in the advanced delivery of core clinical research and was involved in key decision-making regarding R&D and product commercialization.

Dr. Mohammed’s received his MD at Ahmadu Bello University followed by an MSc in Orthopaedics at University College London. Dr. Mohammed achieved a DipPharMed in Pharmaceutical Medicine at University of Wales in Cardiff followed by an MBA in Business Administration at the University of Leicester. He is Member, Faculty of Pharmaceutical Medicine (Royal College of Physicians of England), the British Association of Pharmaceutical Physicians and the International Society for Pharmacovigilance.

Dr. Sazzad Hossain, Ph.D., M.Sc. Chief Scientific Officer

Dr. Hossain has more than 20 years of academic and industrial experience in new drug discovery, natural health product development. He was Group Leader and Senior Scientist at Biotechnology Research Institute of National Research Council Canada, Government of Canada’s prime biotechnology research organization where he set up pharmacology laboratory to evaluate safety and efficacy of new drugs under development in the areas of

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cancer, cardiovascular and ocular diseases.

Prior to joining the National Research Council Canada, he was at Xenon Pharmaceuticals in Vancouver, B.C, where was Associate Director of Pharmacology and led pharmacology teams targeting pain, inflammation and cardiovascular diseases. Dr. Hossain received his PhD in Biology from Moscow State Academy of Veterinary Medicine & Biotechnology and received post-doctoral training in the Department of Nutritional Science and Department of Medical Genetics of University of British Columbia. He was associate professor of pharmacology at Federal University of Minas Gerais, Brazil between 1988 -1996. He is the author of more than 40 peer-reviewed papers, primarily in the pharmacology, genetics and nutritional sciences.

Dr. Tarek S. Mansour, Ph.D., M.Sc. Scientific Advisor

Dr. Tarek Mansour, Ph.D., is a veteran executive of the Life Science sector with over 26 years of experience in drug discovery and development. He has held senior leadership and management positions within both the biotechnology and pharmaceutical sector. Dr. Mansour’s industrial career started in 1989 with BioChem Pharma in Quebec; after which he joined Wyeth-Ayerst in 1997 as Assistant Vice-President to direct the medicinal chemistry efforts at the site in Pearl River, NY. In 2009, his responsibilities were expanded to head the Chemical Sciences Department at four discovery sites in the USA, as well as CRO support in India. After the Wyeth acquisition by Pfizer in 2009, Dr. Mansour was responsible for transition of staff and projects to the Pfizer pipeline. Subsequently, in 2010 he became the Executive Vice-President of R&D for Xenon Pharmaceuticals in British Columbia, Canada until early 2013. In mid-2013, Dr. Mansour became the Founder and Chief Executive Officer of Sabila Biosciences LLC, New York. Dr. Mansour’s expertise spans multiple therapeutic areas including anti-infectives, oncology, inflammatory, metabolic, cardiovascular and pain. Under his leadership, several compounds have progressed to various stages of clinical evaluation including FDA approvals and late stage development. Amongst these candidates are Epivir, Zeffix, Troxatyl, Bosulif, Neratinib and PFE384.

Paul C. Anderson, Ph.D.

Dr. Anderson is a pharma industry veteran who brings significant drug discovery and development expertise to InMed. Dr. Anderson is a synthetic organic chemist by training with more than 30 years of experience in pharmaceutical research and development. Following postdoctoral studies in bioorganic chemistry at the University of Cambridge, Dr. Anderson began his career in the

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pharmaceutical industry at Merck Frosst Canada Inc. He subsequently joined Boehringer Ingelheim and in more than 20 years with the company, held positions of increasing responsibility in the research organization including more than 12 years as head of the Boehringer Ingelheim research centers in Canada and in the United States.

While in Canada, Dr. Anderson and his team introduced several anti-viral drugs into pre-clinical and clinical development, including the first HCV protease inhibitor to be tested in humans. As head of research for Boehringer Ingelheim in the United States, Dr. Anderson and his team carried out research on autoimmune and cardiovascular diseases, advancing several compounds into pre-clinical development. He received his Ph.D. in organic chemistry at the University of Alberta. You can check out the entire management team here. Dr. Mohammed’s time at GW Pharmaceuticals is especially promising, considering the success it has had in pioneering the medical marijuana industry.

InMed has a market cap of $18.5 million and a 52-week range of $0.08 - $1.01.

It is currently trading at $0.21, so the same warnings apply here: This is a highly speculative play, so do not risk any more than you can afford to lose.

You can view its latest investor presentation here.

Plugging the Leaks

Finally, the dredges of winter have come to an end (at least here on the East Coast of the U.S.). That means we’ll have the pleasure of cooling our homes.

Now, I use open windows and fans as much as possible. Not only am I thrifty (or plain cheap if you ask my wife), but I much prefer fresh air blowing around my house over the sterile frigidity of air conditioning.

As Jason Lee’s character in the movie Dogma said, “There is no pleasure, no rapture, no exquisite sin greater... than central air.”

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With that in mind, let’s tame that beast and save ourselves some loot...

Clean Your Vents

For those of us with central air conditioning, the vents around your house are crucial to efficient air circulation. If you have any vents that are either closed or dirty, it will affect how much you are paying to blow cool air through them.

To be honest, I always thought that closing some vents would actually help with cooling costs, since you’d only be running cool air through the vents you expect to use most often.

I was dead wrong... closed vents actually increase your energy costs.

You should open up all your vents to allow your air conditioning to move freely and unobstructed throughout your house.

Another thing I found when researching is that most vents will also have air filters. Who knew! Most experts will recommend replacing these filters every month or two. I seriously doubt that I’ll remember to actually do that, but even if you replace them a couple times a year, you’ll save yourself some cash over the course of the year.

Fans

As I mentioned, I love fans; I have several ceiling fans throughout my house and plenty of window fans and even floor fans. It may be obvious that this is a far cheaper way to cool your home, but you may not know how much cheaper...

Central air conditioning uses around 3,500 watts of energy when running, where a ceiling fan uses somewhere in the neighborhood of 60 watts. But you can unleash the awesome power of ceiling fans with one simple trick...

You see, many people do not realize that you can switch the direction of those fans to either push the air down or pull it up. I just found this out a couple years ago, and boy does it make a difference.

Your fan should have a switch that allows you to turn the fan clockwise or counterclockwise. When it is starts getting warm, you’re going to want to spin the counter-clockwise to pull the warm air up and out of the house.

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When it gets cold again, simply reverse it to clockwise to push the warm air back down.

If your fan switch isn’t clearly labeled, you can easily tell the difference with a quick exercise. Stand under the fan and crank it on. If you immediately feel a breeze, then it is running counter-clockwise, which you want in the spring and summer. If you do not feel a breeze right away, flip the switch for immediate comfort for both your home and your wallet.

If you simply must run your AC, do so around 78°F instead of, say, 72°F. That can lower your cooling bill up to 18 percent. The smaller the difference between the indoor and outdoor temperatures, the lower your overall cooling bill will be, so set your thermostat as high as possible during the warmer months.

Trees

Another way to shield your house from oppressive heat is to shade your home with trees.

You see, most heat making its way into your home comes right from the sun shining onto your roof and through your windows — which is pretty obvious. The simple solution is to plant some trees around your windows to shield you from that heat — while keeping you concealed from your creepy neighbor at the same time!

According to the National Arbor Day Foundation, large deciduous trees planted on the east, west, and northwest sides of your home create can reduce summer air conditioning costs by up to 35%.

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And if you have window units, you can boost your AC’s efficiency by up to 10% by planting trees, bushes, or shrubs to provide direct shade to your air conditioner, according to the U.S. Department of Energy.

All told, you can save upwards of $300 a year with well placed trees.

It’s the perfect time of year to grab yourself some trees... In fact, I just ordered two red maples for this exact reason.

So get outside and start planting!

Happy spring,

Jimmy Mengel

Investment Director, The Crow’s Nest

The Crow’s Nest, Outsider Club LLC Copyright © 2013, 111 Market Place, Suite 720, Baltimore, MD 21202. All rights reserved. No statement or expression of opinion, or any other matter herein, directly or indirectly, is an offer or the solicitation of an offer to buy or sell the securities or financial instruments mentioned. While we believe the sources of information to be reliable, we in no way represent or guarantee the accuracy of the statements made herein. The Crow’s Nest or Outsider Club LLC does not provide

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