Mentor Capital Inc (OTCMKTS:MNTR) Has Large Growth Potential In 2017

Mentor Capital Inc (OTCMKTS:MNTR) is an interesting one. The company is an investment entity, a sort of private equity entity, for want of a better phrase, that focuses on early stage investment in medical and recreational marijuana companies. It is picking up strength at the moment on the back of an announcement relating to what looked like an error in judgment (which against the backdrop of the business model it's trying to operate, would be a red flag) but what has now proven to demonstrate its ability to gauge the growth potential of its target acquisitions.Before we get into the detail there, a quick introduction. The company bills itself as a public company that invests in medical and social use cannabis companies. Its business model is pretty simple – take a large stake (between 10-60%) in private medical and recreational marijuana company, and then sit back while management steers the ship. It provides the capital, and let's management do what they do best. It gets the capital it uses to pick up the stake from shareholders. It's authorized (the company describes this authorization as similar to an IPO, which makes sense) to raise $140 million through public issue, and then it trades a portion for these funds for the above mentioned percentage range ownership.Basically, it offers public markets access to a private company in the marijuana space, and offers private companies in the space access to public market capital.It bases its current valuations on revenue multiples far less than current industry multiples (which sit somewhere around 30x to 80x revenues in many cases) and does so on the assumption that a reasonably solid company in the space should be able to take advantage of the high expected growth, and achieve a minimum of the low end of the above 30x to 80x revenues range.With this sort of entity, it's all about who's running the investment decisions, and right now its CEO Chester Billingsley. He's an ex General Electric Company (NYSE:GE) exec who left the latter to start a company called Tech Start, which was basically the same model as Mentor Capital, but in the tech space. In 2013, he changed the focus from tech to cannabis.What happened with the latest announcement?The company set up a deal in 2014 that saw it pay $1.5 million cash for a 60% stake in a company called Bhang Corporation, which is a type of cannabis chocolate infusions company. According to reports, Bhang overstated its sales numbers, took the money and never delivered the shares. Mentor took Bhang to court, and the court just ruled in favor of Mentor, with Bhang being ordered to pay somewhere in the region of $1.6 million.Mentor is probably not going to be able to pull this cash in from Bhang anytime soon, these things can be dragged out, but the cash isn’t the important thing here, for us. What is important is what the court proceedings have revealed. At the time of the 2014 arrangement, Bhang had less than $1 million sales. It now has more than $6 million annual sales, meaning top line has risen 500% in less than three years. Regardless of the court proceedings, it points to Mentor's (and specifically, Billingsley's ability to pick some real winners in the space.At year end, 2016, the company had $1.2 million cash on hand and no debt apart from some long-dormant non-interest bearing IOU’s to Billingsley.What's next?It's all about making the right picks in the private space as the market expands. We think Billingsley's got the experience to make these picks, and with what is a pretty unique approach to the space (at least in this nascent form) there's plenty of of upside potential on its current market cap.We will be updating our subscribers as soon as we know more. For the latest updates on MNTR, sign up below!Disclosure: We have no position in MNTR and have not been compensated for this article.