Do you have $ 5,000? Buy these 3 Hot Pot shares immediately
With Republicans in the House of Representatives recently introduced legislation to legalize marijuana at the federal level, the potential for a bipartisan cadre is closer than ever. While the patchwork quilt of state-by-state efforts is a sort of workaround for a growing industry, it is a poor substitute for cohesive national policy.
The recent South Dakota Supreme Court ruling overturning an electoral referendum approving the legalization of weed is one example. Cannabis has therefore been a difficult market, but three Motley Fool contributors believe that Innovative industrial properties (NYSE: IIPR), the Horizons Marijuana Life Sciences NBIF (OTC: HMLSF), and Pharmaceutical Jazz (NASDAQ: JAZZ) are the best buys right now.
Mastering the cannabis real estate and growth financing markets
Alex Carchidi (Innovative industrial properties): When it comes to cannabis stocks with a lingering appeal, it’s hard to beat Innovative Industrial Properties.
IIP’s strategy is to build a real estate empire of cannabis cultivation facilities rather than growing marijuana for consumers. With a $ 51 million purchase of a new property in California on October 18, his empire is growing month by month. But Innovative Industrial’s game is not limited to buying properties, because in order to generate cash flow from its wealth, it is necessary to find tenants to rent them out. And who better to own productive real estate than the company that sold it to IIP in the first place?
By buying space and then renting it out to the previous owner in what’s called a sale-leaseback transaction, everyone wins. Innovative Industrial recovers a new asset, and the cannabis company obtains a much-needed amount of cash, which it can then use to expand its operations.
Systematically building on rental income by purchasing new facilities is a business model that will never get old, at least as long as the marijuana industry continues to be barred from accessing more traditional sources of finance like bank loans. And that rental income isn’t really small either. IIP’s revenue grew 56.9% year-over-year in the third quarter, which management says will translate to a total of $ 195.5 million in 2021.
Importantly, the IIP is also paying a hefty dividend which is currently earning around 2.31%. While that return doesn’t seem so hot, consider that its dividend payout went from $ 0.35 per share in September 2018 to $ 1.50 per share in September 2021. If it continues to rise at this amazing rate fast – and with its rental income exploding, it probably will be – people who invest in IIP will be sitting on substantial returns in virtually no time.
Buy a reference
Eric Volkman (Horizons Marijuana Life Sciences Index ETF): In the cannabis industry which is always losing money, some companies will win eventually, but many others will lose. Considering this, it is wise to put money into an investment that places knowledgeable bets on potential champions. One coupon is the Horizons Marijuana Life Sciences Index ETF.
Horizons Marijuana Life Sciences is the world’s first marijuana exchange-traded fund (ETF), launched in April 2017, long before the recreational pot market officially launched in its native Canada, by the way. As it is the original and is still relatively strong, it is often used as a benchmark for the broader marijuana industry.
Although Horizon Marijuana Life Sciences is a Canadian security managed by a Canadian company, it has recently moved away from the many struggling companies in the weed business in this country. As of November 19, the ETF’s once-rich maple leaf portfolio contained just four native stocks among its top 10 holdings. The rest – except Ireland Pharmaceutical Jazz – are American companies.
This is to the credit of management, since the American market has much more potential than its saturated Canadian counterpart. While we shouldn’t expect a full or even widely extended decriminalization / legalization of recreation in the United States, in the medium to long term it is almost inevitable. In addition, the United States has nearly nine times the population of its northern neighbor.
And these American holdings are also promising. Topping the list for Horizon, which accounts for over 20% of the total portfolio, is the eternal weed star Innovative Industrial Properties. This real estate investment trust (REIT) is not only one of the very few consistently profitable marijuana stocks, it also pays a regular quarterly dividend.
Other members of the Top 10 Skyline Beating The Stars and Stripes Include Suppliers of Specialty Growing Equipment Scotts Miracle Gro, another profitable dividend payer, and the rapidly expanding GrowGeneration.
The Horizons ETF family includes a US-only cannabis security called – yes – Horizons US Marijuana Index ETF. This is intended to replicate the performance of its nearly namesake U.S. Marijuana Companies Index.
Although it contains a handful of potential winners – Trulieve Cannabis for a, Cresco Laboratories on the other hand, it’s a bit one-dimensional, as it focuses exclusively on retailers. This is why I prefer Horizons Marijuana Life Sciences of the pair.
More than a few investors are doing it too; So far this year, Horizon Marijuana Life Sciences as a stock performs better than big names in Canadian and American weed like Cresco Labs, Curaleaf, and Aurora Cannabis. Once the legal environment in the United States begins to improve dramatically, we shouldn’t be surprised if this sustainable ETF begins to widen that gap more dramatically.
Buying your way into cannabis
Rich Duprey (Jazz Pharmaceuticals): Jazz Pharmaceuticals isn’t your typical marijuana stock as it comes from the biotech realm, but its $ 7.2 billion acquisition earlier this year from GW Pharmaceuticals puts it firmly in the cannabis camp.
Through this merger, Jazz gained access to Epidiolex, a treatment for two forms of childhood epilepsy, while also obtaining approval from the Food and Drug Administration for its use in the treatment of tuberous sclerosis, a disease rare organ. The basis of therapy is cannabidiol (CBD), the non-psychotropic compound found in marijuana, and sales consistently exceed expectations.
Although the COVID-19 pandemic has slowed down new patient starts for Epidiolex slightly, revenue growth remains strong. Sales grew 21% to $ 160 million in the third quarter, and are almost half a billion dollars year-to-date, putting it on track to become a potential blockbuster. . Four of the five major European markets (it is approved for use in over 30 countries) reimburse Epidiolex in full. And with the pivotal Phase 3 trials for the treatment of epilepsy with myoclonic-atonic seizures – the fourth target indication for therapy – set to begin in the first half of 2022, Jazz is on track to meet its goal of having a hit drug on his hands.
The success of the CBD drug is bolstered by an existing billion dollar drug, Xywav, the next-generation advancement of Xyrem, a treatment for sleep disorders. The FDA has granted Xywav, which has been shown to be clinically superior to Xyrem, orphan drug status and a seven-year window of exclusivity. Combined sales of the two drugs totaled more than $ 1.3 billion in the first three quarters of 2021.
Jazz also has a robust oncology platform that has generated over half a billion dollars to date.
At just seven times next year’s estimated profits, Jazz Pharmaceuticals looks cheap – Wall Street expects its revenues to almost double by 2025, to $ 4.4 billion, generating a net profit of $ 1 , $ 6 billion, nearly seven times more than the $ 238 million it produced last year.
This makes this stock of marijuana one to consider buying right now.
This article represents the opinion of the author, who may disagree with the “official” recommendation position of a premium Motley Fool consulting service. We are motley! Challenging an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer.