“Sin Stocks” Make Great Investments
By now, investors know that marijuana stocks can multiply your wealth by up to five times. The cat is out of the bag, and, as a result, cannabis is one of the hottest sectors of the stock market.
It shouldn’t come as surprise…
The long history of “sin stocks”—tobacco, gambling, and alcohol—show that real money is made from vice. For example, tobacco producer Reynolds American, Inc. (NYSE:RAI) has been around for 250 years, yet it still managed to grow 203% in the last five years.
Casino company MGM Resorts International (NYSE:MGM) advanced 174% at the same time, and it was formed in the late 1960s.
What’s my point? Only that sin stocks have made millionaires across the United States.
Marijuana is the latest example of this trend. Some of the stocks in this space have skyrocketed 644% in less than 12 months. Another one surged 540% in less than 52 weeks, and a third climbed 347% in less than a year.
Once again, this shouldn’t come as a surprise…
43% of American adults have experimented with marijuana, and (at least) 13% of them use the substance on a regular basis. Millions more “light up” on an occasional basis. A little arithmetic shows us that this means there are 40 million American consumers of marijuana products.
In other words, the marijuana boom is here to stay…
The Secret to Marijuana Millions
Also, the marijuana business is like fast food. You have growers (of lettuce, of marijuana; it doesn’t matter), distributors, and retailers. Customers go into the store, order some “takeout,” and enjoy something that probably isn’t good for them.
And, just like in the fast food business, we’ll probably see independent locations get wiped out by chain stores. Maybe we’ll even get drive-through dispensaries in some major cities.
Considering these similarities, it makes sense to look at the greatest fast food investment of all time: McDonald’s Corporation (NYSE:MCD).
For those who may not know, McDonald’s stock has grown by more than 90,136% in the last 50 years. Think about that for a minute. It means that $5,000 in 1967 would be worth approximately $4.5 million today.
Chart courtesy of StockCharts.com
But McDonald’s didn’t become a world-leading fast food restaurant by selling better burgers than everyone else. They did it by making burgers faster than everyone else. And by owning the land on which their restaurants were built—that part is crucial.
McDonald’s became most valuable as a real estate company, not as a burger joint.
Similarly, the best marijuana stock might be in real estate too. It is called Innovative Industrial Properties Inc (NYSE:IIPR), and it essentially buys and leases properties to marijuana growers.
Innovative Industrial Properties
Innovative Industrial is structured as a real estate income trust (REIT). This means that it essentially buys properties and rents them out to other businesses. In the case of IIPR, it will only lease out space to companies on the cutting edge of tech or legality—it’s their niche.
The company’s first client, PharmaCann, is paying IIPR $319,580 per month for rent, with a $105,477 property management fee stacked on top. Another one of Innovative Industrial’s properties will house Holistic Industries, a marijuana grower that will pay $1.2 million per month in rent.
And IIPR is just getting started.
It started trading on the New York Stock Exchange (NYSE) in December 2016, which means the company has yet to complete a full year in the spotlight. (This might explain why the stock is so affordable; no one knows it exists!)
At the moment, IIPR stock is trading at around $19.69, just below its initial public offering (IPO) price. If the macro trends are any sign, this is an amazing opportunity to get in on the ground floor of the marijuana boom.
Considering that marijuana is still illegal at the federal level, cannabis-related companies have a hard time securing bank loans. This is a good thing for Innovative Industrial Properties Inc because its customers are marijuana growers and distributors.
Those firms need a “clean” partner to buy property and rent it to them. Maybe the demand for this service will fall once national legalization is in place, but Attorney General Jeff Sessions has ensured that this day will not arrive anytime soon.
As such, I maintain a strong bullish position on IIPR stock.