The U.S. legal marijuana market could hit $14.5 billion in sales in 2018, explains Brit Ryle; for those comfortable with the inherent risks of investing in cannabis stocks, the editor of The Wealth Advisory highlights a trio of stocks set to participate in the growth of this sector.
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.
After a substantial drop last month, Scotts has recovered nicely. It’s up by over 7.5% and, despite a downgrade from Raymond James analysts, remains a solid long-term play on the legal cannabis market.
Thanks to its purchase of Sunlight Supply, Scotts has over a thousand retail locations to sell its “urban gardening” wares. And because it already has lucrative deals with big-box stores, like Lowe’s (LOW), Walmart (WMT), and Home Depot (HD), you should expect to see Hawthorne products making their way onto those shelves, as well.
The Sunlight purchase is big because its shelf space where growers shop. But the big-box sales will be truly massive. Just a 5-foot display at every Home Depot, Lowe’s, and Walmart in the country would give Scotts over 81,000 feet of retail space. That’s a lot of fertilizer. The Scotts Miracle-Gro Company is still a “Buy” under $90.
Alliance One International (AOI) purchases, processes, packs, stores, and ships leaf tobacco for manufacturers of cigarettes and other consumer tobacco products worldwide. It also provides agronomy services for growing leaf tobacco. And it’s the majority owner of two Canadian cannabis companies.
I expect we’ll continue to see an ebb and flow with AOI for the short-term future. There’ll be a wave of interest as investors uncover its untapped value. Then there will be a wave of selling as earlier investors take profits.
Then there’ll be another wave as investors start to see the cannabis connection and the potential profits from that industry. And there will be more profit taking. It’ll be a bumpy ride, like with most cannabis investments, but it’ll pay off tenfold in the long run when cannabis is legalized nationwide and AOI is a first-mover. Alliance One International is still a “Buy” under $20.
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.
This is still a serious growth stock. And it’s the only company of its kind in an industry that’s desperate for the financing it offers. Cannabis companies can’t get access to big banks and massive lines of credit to grow.
So, they need IIPR to step in, buy their operations, and give them the cash they need to keep growing. And they’re completely willing to pay premium rent back to their new landlord to make sure the deal works out.
Speaking of deals working out, IIPR recently acquired a new property and entered into a new long-term lease with Holistic Industries in Massachusetts. The Massachusetts market is estimated to hit $1.2 billion by 2022. That’s a lot of “reefer royalties” for us to collect.
You should be treating this recent dip as a buying opportunity. In fact, you should be treating every dip as a buying opportunity. Our 80% gain in this stock is only the start. I still rate Innovative Industrial Properties a “Strong Buy” anywhere under $40.
