3 Cannabis Stocks to Buy Before the Big Breakout
Cannabis stocks will eventually see higher highs — with patience. Right now, we’re waiting to see if the Drug Enforcement Administration (DEA) takes the U.S. Department of Health and Human Services’ (HHS) advice to remove cannabis as a Schedule I drug, which could boost related stocks. We’re also waiting to see if there will be any potential progress on legalization as we near the next election cycle.
What we do know is that most Americans want to see legalization. In fact, according to Pew Research, “An overwhelming share of U.S. adults (88%) say either that marijuana should be legal for medical and recreational use by adults (59%) or that it should be legal for medical use only (30%). Just one-in-ten (10%) say marijuana use should not be legal.”
That being said, investors may want to use any weakness in related cannabis stocks as an opportunity to at least accumulate shares of these three stocks.
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Cannabis Stocks: Innovative Industrial Properties (IIPR)
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While Innovative Industrial Properties (NYSE:IIPR) has had a good share of volatile moves this year, it’s definitely worth buying and holding for the long-term.
For one, as we wait for the eventual cannabis boom, and recovery in the IIPR stock, investors can collect its 10% yield. Two, when we do see legalization, IIPR has a considerable advantage because it provides real estate for the industry, as a real estate investment trust (REIT).
Even better, the company’s adjusted funds from operations stands at 9.69% at the moment. That’s well above the industry’s median of 4.17%. Furthermore, IIPR has a dividend growth rate of 5.88%, as compared to the sector mean of 3.94%. IIPR also has 30 clients across 19 states with 108 properties, with rent collections ranging from 98% to 100%.
Tilray (TLRY)
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Cannabis stock, Tilray (NASDAQ:TLRY) could see higher highs on potential cannabis legalization – and the beer business. Helping, the company just reported $177 million in net revenue, which was up 15% year-over-year (YOY). Its cannabis division brought in $70 million, which was 20% YOY growth. It also narrowed its net loss to $55.9 million from $65.8 million a year earlier.
While those numbers were impressive, its Tilray’s move into beverage M&A that could send it even higher. In fact, according to CEO Irwin Simon, as quoted by CNBC, “We’re waiting for legalization to happen in the U.S. If it happens, it will be great and we’re well-positioned.” However, if legalization doesn’t happen any time soon, TLRY can always fall back on its beverage business, which is booming.
Over the last few weeks, Tilray acquired eight beer brands from Anheuser-Busch (NYSE:BUD). And it acquired the remaining equity owning of cannabis-infused drink maker Truss Beverage from Molson Coors (NYSE:TAP), as also highlighted by CNBC.
Global X Cannabis ETF (POTX)
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Or, if you want to diversify with top cannabis stocks at a low cost, there are ETFs like the Global X Cannabis ETF (NASDAQ:POTX).
With an expense ratio of 0.51%, the ETF invests in companies involved in the legal production, growth and distribution of cannabis and industrial hemp, companies involved with financial services to the cannabis industry, as well as CBD applications, according to Global X ETFs. While its chart isn’t very attractive at the moment, give it time.
With eventual legalization, and a good deal of patience, the POTX ETF could see higher highs. Some of its top holdings include Innovative Industrial, SNDL (NASDAQ:SNDL), Tilray Brands, Canopy Growth (NASDAQ:CGC), Cronos Group (NASDAQ:CRON), and AFC Gamma (NASDAQ:AFCG) to name a few.
On the date of publication, Ian Cooper did not hold (directly or indirectly) any positions in the securities mentioned. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Ian Cooper, a contributor to InvestorPlace.com, has been analyzing stocks and options for web-based advisories since 1999.
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