Marijuana News Today: These Institutional Investors Just Went Bullish on Pot

Marijuana News Today: These Institutional Investors Just Went Bullish on Pot
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Marijuana News Today

The marijuana news today has us seeing a number of public pension funds get in on the pot business by investing in a California real estate investment trust (REIT).

The public pension funds for government employees hail from a variety of states with varying degrees of marijuana laws. (Source: “American public pension funds invest in cannabis through California-based REIT,” Marijuana Business Daily, July 25, 2019.)

The combined value of all these state funds is well into the billions and speaks  to institutional investors’ growing comfort with the marijuana industry.

A total of 16 state pension funds and one in Canada are investing in Innovative Industrial Properties Inc (NYSE:IIPR), a company that I have been bullish on for some time now.

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Some of these pension funds are massive, like the New York State Common Retirement Fund, the California State Teachers Retirement System, and the Texas Permanent School fund.

These funds are also based around high-yield, low-risk stocks. After all, you don’t want the state gambling your retirement fund away on some micro-cap stock that operates out of the back of a van. These are funds designed to seek out and profit from stability, which makes sense as to why they chose IIPR stock (more on that below).

But the recent surge of investment by these funds also speaks to the growing comfort of institutional investors with marijuana more broadly.

As the industry continues to mature and grow, larger investors may no longer be scared away by the stigma surrounding pot and the concern that this is an unstable industry. Instead, they might be drawn by the high potential for gains, leading to an influx of capital and growth among pot stocks.

It’s worth noting that even states with governments staunchly opposed to marijuana reform, like Tennessee, ironically have invested into pot, once again speaking to the general enthusiasm around marijuana among investors.

As the marijuana sector continues to grow, it will see an increasing number of larger institutional investors wanting to get in on the action. As these larger entities flock to pot stocks, expect to see shares rise in tandem with the influx of capital. Not to mention that all these large cash injections will similarly help these companies expand and further generate gains, creating a positive feedback loop.

Overall, this is very positive news for the marijuana industry and another important milestone indicating a maturing industry that still has plenty of room for growth should excite investors.

IIPR Stock

Seeing as how IIPR stock stole the headlines in the marijuana news today, it’s worth taking a second look at the company.

Again, this marijuana REIT has been on my radar for a long time and continues to impress.

As a REIT, Innovative Industrial Properties Inc is mandated to distribute 90% of its profits back to investors as dividends, making for a powerful combination: high growth potential in the marijuana industry and steady income via dividends.

Furthermore, IIPR stock allows investors to enter the U.S. marijuana market more comprehensively than most pot stocks can offer. That’s because Innovative Industrial Properties is present in 12 states and continuously expanding. Most pot stocks that are currently available are limited to a handful of U.S. states due to the current federal prohibition the country has against weed.

The combination of an attractive quarterly dividend with a strong foothold in the most promising marijuana market on Earth, the U.S., leaves IIPR stock with both a bright future and a solid present.

Having said that, the company has experienced astronomical gains in 2019, having climbed 230% in the past year. That huge growth has led to a bit of a market pullback at IIPR stock, but I believe that this fall will be temporary and that the company will again be seeing big gains when the marijuana market in general exits the current pullback.

IIPR stock climbed nearly four percent in early morning trading, but finds itself down 13% over the past five days.

CTST Stock

It’s been a strong day all around for pot stocks, however, with many seeing gains today. One of the more surprising winners is CannTrust Holdings Inc (NYSE:CTST).

CTST stock jumped nearly 20% in early morning trading, in stark contrast to the 17% collapse the company has experienced over the past five days.

In fact, the collapse at CTST stock has been long and painful, with the company having been subject to an audit by Health Canada that resulted in its greenhouse facility in Pelham, Ontario being deemed non-compliant with certain regulations. (Source: “CannTrust Statement Regarding Health Canada Audit,” Cision, July 8, 2019.)

Health Canada proceeded to place a hold on CannTrust Holdings Inc’s inventory, which includes over 10,000 pounds of dried cannabis.

Over 15,000 pounds were placed on a voluntary hold by the company at the Vaughan, Ontario facility due to the cannabis having originated from these unlicensed rooms.

Things only got worse following a report that that Chairman Eric Paul and Chief Executive Officer Peter Aceto had been informed the company was growing pot in unlicensed rooms about seven months before Health Canada first approached the company. (Source: “Call for CannTrust management shakeup as stock plunges on report executives knew about unlicensed growing,” Financial Post, July 24, 2019.)

That led to immediate action from the company, with the board firing Aceto and asking Paul to step down. In Aceto’s place the board appointed Special Committee Chair Robert Marcovitch to the role of interim CEO.

“Our first priority is to complete the remaining items of our investigation and bring the Company’s operations into full regulatory compliance.  Implementing the necessary changes is essential to the interests of our medical patients, customers, shareholders and employees,” said Marcovitch. “CannTrust has a number of strengths it can draw upon to reset and rebuild, including industry-leading research, innovation and intellectual property.” (Source: “CannTrust Announces Senior Leadership Changes,” Cision, July 25, 2019.)

But I’m not so sure about CTST stock, even with the impressive gains today and the leadership shakeup. In times like these, investors are looking for change; after all, the people guiding the company before had pretty much destroyed the stock.

Having said that, unless the new leadership is able to make a number of difficult and wide-ranging fixes to CannTrust Holdings, the company is still in a very deep hole.

We’re talking a potential total shutdown of sales should Health Canada revoke its license for any length of time. As such, while there is some hope at CTST stock, I don’t think that investors should be swayed by today’s impressive display. Long-term, I believe that CannTrust Holdings Inc has a long road to recovery. Unless you’re a day trader, short trader, or someone who likes speculative high-risk plays, I’d steer clear of CTST stock.

IIPR and CTST Stock Performances

The performances of IIPR stock (black line) and CTST stock (blue line) over the past week are seen on the chart below:

Chart courtesy of StockCharts.com

Analyst Take

The marijuana news today is pretty grand all around.

We have a marijuana stock market that is largely on an upswing following several weeks of down periods. And we also have a number of pension funds getting in on the marijuana action, speaking to a new comfort developing among institutional investors with pot.