New Trade for November 24th, 2020

Futures are green this morning as Wall Street looks to continue yesterday’s rally.  Stocks spiked yesterday on news of the Trump administration approval of Joe Biden’s transition and the president-elect’s announcement to pick Janet Yellen as his Treasury secretary.  

Some marijuana stocks have cleared, or are trying to clear bases in the wake of the election.  Canadian cannabis producer Aphria (APHA) rose 3.75% on Monday.  Canopy Growth (CGC) also rose 4.2% on Monday.  The election implications for the group are undeniable.  But investors have come to cannabis stocks in the past, only to get burned.  APHA is down more than 60% from its 2018 high.  CGC has lost half of its value in the same time.  A bitter pill to swallow for longer-term holders.  

However, savvy investors who were on top of their due diligence in 2018 may have been lucky enough to find this unique gem in the marijuana group.  Over the past two years, as the air was slowly draining from the major producers, this company delivered a total return of 150%.  And it looks like they’re just getting started.  Shares are currently trading with a three-weeks-tight pattern, just below IBD’s official buy point.  

Innovative Industrial Properties (IIPR) is a rarity among marijuana stocks in that it’s a real estate investment trust (REIT).  Specifically, IIPR invests in greenhouses and industrial facilities for the medical cannabis industry.

Among marijuana stocks IIPR has generally maintained the best IBD ratings over the past two years.  IIPR has a Composite Rating of 92.  Its EPS Rating is 74.  

Currently, this REIT remains an excellent play on the growing cannabis trade in the U.S..  In 2018, IIPR owned nine properties that it leased to medical cannabis producers.  Today, that’s up to 63 properties across 16 U.S. states, with 4.4 million rentable square feet, boasting an occupancy rate of 99.2%.  IIPR swelled by 13 properties during the first six months of fiscal 2020, spending $138.7 million for almost 1.4 million square feet in triple-net leases (the tenant pays for insurance, maintenance and taxes, making the REIT’s profits more consistent and predictable).

Roth Capital has said that more purchases were likely ahead, as the company tries to lock in gains before potential federal reforms expand banking and financing options to the cannabis industry.

Roth said, “the sale-leaseback model remains the non-dilutive capital raising method of choice for many operators and IIPR remains the industry leader with unmatched access to capital compared to its peers.”

IIPR is a popular stock among analysts, garnering three Strong Buys and three Buys versus just one Hold and no Sell calls of any sort.  IIPR stock also comes along with a 3% yield.