The COVID-19 pandemic disrupted IIP’s business somewhat, with three tenants receiving temporary rent deferrals. The ancillary company has still grown phenomenally during the pandemic and is highly profitable. Because the company is organized as a real estate investment trust (REIT), IIP returns at least 90% of its taxable income to shareholders.
This huge industry holds opportunities for long-term investors, but there are risks too.
3. Innovative Industrial Properties
Healthcare is a growing industry, and cannabis investors may benefit from getting acquainted with it.
Jazz Pharmaceuticals (NASDAQ:JAZZ) acquired the cannabis-focused biotech company GW Pharmaceuticals in May 2021. GW’s drug Epidiolex is the first cannabis-based medicine to be approved by the U.S. Food and Drug Administration (FDA). Epidiolex, which treats two rare forms of childhood epilepsy, is generating sales that are routinely surpassing expectations. While new patient starts for Epidiolex slowed slightly with the COVID-19 pandemic, the company has continued to deliver strong revenue growth.
U.S. cannabis companies can’t easily secure capital from banks or financial institutions since marijuana remains illegal at the federal level. Innovative Industrial Properties (NYSE:IIPR) helps to solve that cash shortage for growing marijuana companies by buying properties owned by U.S. medical cannabis operators and leasing those same properties back to them. The property sale to IIP provides the cannabis operator with much-needed cash, and the lease agreements create a steady revenue stream for IIP.
Consolidation among marijuana stocks is getting busy in 2021 on both sides of the 49th parallel. In Canada, two of the largest cannabis producers merged in early May, making Tilray (TLRY, $13.26) that country's second-largest behind only Canopy Growth.
Cresco Labs (CRLBF, $9.99), like Curaleaf, is a multistate operator with operations in 10 states, sporting 44 retail licenses, 18 production facilities and 32 operational dispensaries. Its national brands include Cresco, Reserve, Remedi and Mindy's (edibles).
Cresco reported record Q2 2021 revenues and adjusted EBITDA at the end of June. Sales jumped 123% over Q2 2021 to $210.0 million. Adjusted EBITDA of $45.5 million was 98% higher than in the second quarter of 2020. In addition, it reported a net profit of $2.7 million, 106% higher than it was a year ago.
Leafly is based in Seattle. It operates a three-sided marketplace between itself, more than 125 million annual visitors (10 million monthly unique visitors) to its website and app, and 7,800 cannabis brands. Leafly is described as a non-plant-touching platform positioned to benefit from the acceleration of cannabis legalization in North America.
Like many cannabis stocks in 2021, MSOS started out strong earlier in the year but has since come back to earth. The ETF has a total return of -7.6% in 2021.
The REIT has a diversified portfolio of properties located in 17 states, with nine of them – including Illinois, California and Pennsylvania – accounting for almost 90% of its 6.8 million square feet of rentable space.
Merida Merger is a SPAC (special purpose acquisition company). It raised $120 million in November 2019 to use to combine with a cannabis-related business. The merged entity has an enterprise value of $385 million and an equity value of $532 million.
These are the marijuana stocks with the lowest 12-month trailing price-to-sales (P/S) ratio. For companies in the early stages of development or industries suffering from major shocks, this can be substituted as a rough measure of a business’s value. A business with higher sales could eventually produce more profit when it achieves, or returns to, profitability. The P/S ratio shows how much you’re paying for the stock for each dollar of sales generated.
Here are the top 5 marijuana stocks with the best value, the fastest growth, and the most momentum.
These are the marijuana stocks with the highest year-over-year (YOY) sales growth for the most recent quarter. Rising sales can help investors identify companies that are able to grow revenue organically or through other means, and find growing companies that have not yet reached profitability. In addition, earnings per share can be significantly influenced by accounting factors that may not reflect the overall strength of the business. However, sales growth can also be potentially misleading about the strength of a business, because growing sales on money-losing businesses can be harmful if the company has no plan to reach profitability.
Best Value Marijuana Stocks
Momentum investing is a factor-based investing strategy in which you invest in a stock whose price has risen faster than the market as a whole. Momentum investors believe that stocks which have outperformed the market will often continue to do so, because the factors that caused them to outperform will not suddenly disappear. In addition, other investors, seeking to benefit from the stock’s outperformance, will often purchase the stock, further bidding its price higher and pushing the stock higher still. These are the stocks that had the highest total return over the last 12 months.
Marijuana stocks, as represented by the ETFMG Alternative Harvest ETF (MJ), have slightly outperformed the broader market. MJ has provided a total return of 36.9% over the past 12 months, above the Russell 1000 index’s total return of 35.0%. These market performance numbers and all statistics in the tables below are as of Aug. 23, 2021.
The marijuana industry is made up of companies that either support or are engaged in the research, development, distribution, and sale of medical and recreational marijuana. Cannabis has begun to gain wider acceptance and has been legalized in a growing number of nations, states, and other jurisdictions for recreational, medicinal, and other uses. Some of the biggest companies in the marijuana industry include Canopy Growth Corp. (CGC), Cronos Group Inc. (CRON), and Tilray Inc. (TLRY). Many big marijuana companies have continued to post sizable net losses as they focus on investing in equipment to speed up revenue growth.
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