"Indirect" Bets on Cannabis

10/10/2018 5:00 am EST

Focus: HEALTHCARE

Briton Ryle

Editor, The Wealth Advisory

Briton Ryle is a leading growth and income expert; here, the editor of The Wealth Advisory looks at two companies with established businesses — plus exposure to the cannabis sector — without the higher risk and volatility of stocks based solely on marijuana operations.

The Scotts Miracle-Gro Company (SMG) manufactures, markets, and sells consumer lawn and garden products worldwide. It recently acquired the top hydroponic nutrient supplier in the U.S. And it now supplies nutrients to a large share of the legal marijuana growers in the country.

There’s so much latent value in Scotts brands. It’s one of the biggest lawn and garden suppliers in the world. It has a massive gardening unit. And with General Hydroponics and the Sunlight Supply distribution chain, it has an almost monopoly on the cannabis nutrient market.

That’ll pay off for the company and for us down the road. Cannabis legalization will come at a federal level. And companies that are positioned like Scotts is will be riding a massive wave of profits for decades. Scotts Miracle-Gro is still a “Buy” anywhere under $80. The 12-month price target is $105.

Innovative Industrial Properties (IIPR) is a REIT that’s focused on the acquisition, ownership, and management of specialized industrial properties leased to experienced, state-licensed operators for their regulated medical-use cannabis facilities.

We're up over 100%, but we’re still adding shares because the future potential here is just too big to even put into words. In less than a year, we’ve doubled our money. In a decade, we’ll be looking at 1,000% or higher. We recently got a dividend boost as a reward for our investment.

And Innovatie Industrial Properties recently boosted the payout by 40%. So, we’re now getting $1.40 per share, per year. Expect more of those hikes to come and keep adding those shares.

I’m boosting the limit some. But don’t chase frenzied rallies. Stick below the limit and you’ll be well-rewarded in the end. I rate the stock a strong buy under $45 for a 12-month target of $60.

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