By now, it should be clear that cannabis investing is one of the great wealth-building opportunities of the early 21st century.
According to the National Institute for Cannabis Investors (NICI), the legal marijuana market is set to explode from $55 billion today to $146 billion by 2025.
Some of the best marijuana stocks have racked up impressive gains. Aurora Cannabis Inc. (NYSE: ACB) is up more than 450% since listing on the Toronto Stock Exchange in July 2017. (It debuted on the New York Stock Exchange in October of last year.)
And Canopy Growth Corp. (NYSE: CGC) is up more than 1,000% since its debut on the Toronto Stock Exchange in 2014 with the ticker WEED. (It started trading on the NYSE in May of last year.)
But the best-known pot stocks tend to be overbought. These companies are typically those growing and producing marijuana, those making and selling high-visibility marijuana-based products (like edibles), or biotechs working on medical uses of cannabis.
But another category of marijuana stocks hasn't been as much in the spotlight and so should offer more potential upside…
The Best Marijuana Stocks in Real Estate
I'm talking about real estate–related marijuana stocks. These companies own or lease properties to licensed cannabis-growing operators. It's an opportunity that has emerged from the legal complications associated with acquiring and managing real estate used for marijuana operations. Real estate specialists provide expertise in navigating this often-treacherous legal territory.
Most of these firms are micro caps or nano caps – relatively small even in the world of cannabis stocks. But while that translates to higher risk, it also means you're looking at an opportunity for big gains.
We've identified the four best marijuana stocks with a focus on real estate – the four most likely to bring gains to your portfolio.
MJ Holdings Inc. (OTC: MJNE)
Market cap: $59.6 million
MJ Holdings is a cannabis-based holding company that operates primarily in Nevada, where it is headquartered. It provides real estate services and management services to the cannabis industry. It also has its own brand of cannabis products, Highland Brothers.
The 16-month-old company has been on a land acquisition spree and expects to grow three times as much cannabis by 2020. MJ Holdings has a proprietary mesh system for growing the plants that it says cuts expenses by 50% to 70%. This gives it a powerful competitive advantage over rivals offering similar services. The company also has plans to expand into Europe.
MJ Holdings has established itself rapidly and has a strong strategy for capitalizing on the coming growth in the cannabis sector. This stock could easily double or triple over the next year or two.
Grow Capital Inc. (OTC: GRWC)
Market cap: $17.4 million
This company, also based in Nevada, was founded in 2014 as Grow Condos Inc. It provides turn-key real estate solutions to client cannabis growers. Last year, when the company changed its name to Grow Capital, it announced a shift in strategy that expands its business model to include technology and financial services to the cannabis industry. Grow Capital's ability to meet multiple needs of its cannabis-grower clients will help those clients thrive – and in turn keep Grow Capital's business healthy as well.
Last month, Grow Capital said it was also looking to make acquisitions of fintech companies it intends to mentor. Like MJ Holdings, GRWC is a stock that could see a rapid rise in price if can successfully tap into the growth of the marijuana industry.
Two Rivers Water & Farming Co. (OTC: TURV)
Market cap: $17.6 million
Two Rivers, as the name suggests, is heavily involved in water management and water rights in addition to its interest in developing and leasing greenhouses to cannabis growers. In February, Two Rivers bought three hemp-focused businesses as it pursued a strategy to vertically integrate within that space "from seed to products."
While the company has high hopes for its cannabis-related business, the water rights business also has tremendous potential. Two Rivers controls significant water rights in an area in south central Colorado where water is a scarce and precious commodity. The company owns the Cucharas Reservoir there and has plans to expand it and market it to both agricultural and municipal customers.
Given that TURV has interests in two high-growth industries – water and cannabis – this stock has a great chance to triple or more over the next couple of years.
But the real estate–related marijuana stock we like best is the least risky of all. It trades on the New York Stock Exchange and offers a 2.25% dividend yield on top of its stock gains. It also happens to be a top pick of the National Institute for Cannabis Investors…
Watch Your Wealth Grow with This Real Estate Cannabis Stock
The stock I'm talking about is Innovative Industrial Properties Inc. (NYSE: IIPR), which operates as a REIT, or real estate investment trust.
REITs buy and rent commercial real estate with the goal of producing income. That income – the rent or lease payments from the tenants – is passed on to investors through the dividend. Income investors like REITs because they're a relatively low-risk way to get steady income and long-term capital appreciation.
But because of its focus on the marijuana sector, Innovative Industrial is unique. It is, in fact, the only publicly traded REIT that invests in cannabis-related properties.
Innovative Industrial concentrates specifically on properties it leases to state-licensed operators of regulated medical marijuana facilities. Such operators struggle to obtain the capital to function because banks are skittish about dealing with companies in the cannabis business.
IIPR is the solution to their problem. When it buys their property and leases it back to them, it frees up vital money they need to operate. The difficulty in obtaining capital also means Innovative Industrial can charge higher rates than most other REITs.
"This REIT earns a stunning 15% on the money it spends to buy a cannabis building. This is two to three times what most landlords can charge on commercial real estate," said Money Morning Director of Cannabis Investing Research Greg Miller, who heads up NICI. "And because it's a REIT, at least 90% of this income makes its way to your pocket in the form of dividend checks."
And IIPR continues to expand by adding more properties. Miller said it had about $130 million in cash suiting on its balance sheet waiting to be deployed.
"Once the company deploys this cash, the income it can earn basically doubles," Miller said.
We've seen that strategy in action already…
IIPR Growing Like a Weed
In its most recent quarter, Innovative Industrial's revenue exploded 111% from the same period a year ago. Adjusted funds from operations (AFFO) jumped 344%.
NICI first recommended IIPR last October, when it was trading at just over $40 a share. The stock closed Monday at $83.32 a share, more than doubling in just six months.
But that doesn't mean investors who didn't buy last fall can't make money.
Miller says Innovative Industrial has so much potential ahead of it that it's likely to go as high as $250 in about a year.
And the 2.25% dividend yield, because it is based on the company's income, is also bound to keep rising at a healthy clip. IIPR's dividend payout for the first quarter of 2019 rose 29% over the fourth-quarter dividend. And it was 80% higher than the quarterly payout from a year earlier.
"No other REIT is growing as quickly as Innovative Industrial," Miller said. "And another dividend increase could make it seem pretty cheap again, powering another leg up in the company's shares."