There are plenty of reasons to be bullish on the long-term future of the marijuana industry and these cannabis stocks in particular
Forbes.com | February 4, 2020 | SmallCapPower: Cannabis stocks have gone through a boom and bust period in recent years, thanks mostly to management teams that were at once inexperienced and over exuberant, which resulted in far too much wasteful spending. But with consumer demand for pot continuing to soar, there are plenty of reasons to be bullish on the long-term future of the marijuana industry.
(The following is an excerpt from an article originally published on forbes.com on January 30, 2020)
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Illinois, for example, legalized weed on Jan. 1 and ran out of inventory within days, while California is expected to generate over $300 million in marijuana-related tax revenues when it finally closes its books on 2019. Boosting marijuana’s fortunes further is the fact that big, established agricultural and tobacco brands have entered the space, providing funding and operational expertise (without assuming any production responsibilities).
Perhaps the two companies positioned to do best in this environment are Cronos Group Inc. (NASDAQ:CRON) (TSX:CRON) and Innovative Industrial Properties, Inc. (NYSE:IIPR). Cronos, 45% of which is owned by the tobacco giant Altria, is one of the few weed firms that has not overextended itself in recent years. It also has a great CBD business, which is a burgeoning industry, and will benefit from continued commercial opportunities as Canada’s market evolves and state laws become more permissive.
Another beneficiary could be IIPR, a U.S.-based REIT that leases buildings to marijuana cultivators. Thanks to the regulatory risk involved with owning such properties, IIPR can charge tenants a premium, which allows it to maintain large spreads. The REIT has a dividend payout ratio of over 50%, with its dividend having quadrupled in the past two years.
Disclosure: Neither the author nor his family own shares in any of the companies mentioned above.
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