Pot Stock ‘Blood in the Streets’ Buy Signal Is Here

pot stock

The cannabis market has been a volatile space in recent years. A wave in legalization, particularly in Canada but also through parts of the United States, led to significant growth and speculation in the industry.

More recently, though, the space has been hit by an oversupply of product. The end result has been a lot of blood in the streets but, as the saying goes, that’s the best time to buy, even if that blood is yours.

Here are three ways that investors can play a cannabis industry rebound.

Cannabis pure play

One pure-play way to tackle the cannabis industry is through Canopy Growth Corp. (CGC). Though Canopy is headquartered in Canada it truly is a global company with operations in several nations. The company sells recreational cannabis products like ointments and edibles. It sells medical cannabis as well. It owns retail stores Tweed and Tokyo Smoke, as well as hemp operations throughout the United States.

At its core, Canopy represents a compelling prospect because of the liquidity it offers investors. As of the end of its first quarter of its 2021 fiscal year, the company held cash and short-term investments worth $2.05 billion.

It needs the cash because, despite significant cost-cutting, the company lost $108.5 million in the first quarter this year. This is an improvement over the $185.9 million loss seen a year earlier, and it came as the company’s revenue grew 22% year-over-year.

Due to industry oversupply, management shut down two greenhouses and ceased farming at its New York hemp facility. Ultimately, the company needs to become cash flow positive, but its cash hoard gives Canopy a nice runway.

‘Pot adjacent’ stock play

For investors worried about buying into a cannabis firm directly, an alternative is to invest in cannabis farm property. This leads us to Innovative Industrial Properties (IIPR).

Founded as a REIT, IIPR buys up real estate from cannabis firms looking for cash for growth. It leases these assets back to the seller, often under long-term contracts. Many REITs (real estate investment trusts) can only grow so fast, but IIPR has defied expectations.

Whenever the firm buys a cultivation facility or a similar asset, it does so using cash from a share issuance. Though investors are hit with dilution when this happens, they have come to love the issuance strategy. Shares in IIPR often soar in response because of the perceived value of the assets it buys using its stock. Between May and June of this year, the company raised $373.7 million through these stock offerings.

Between April and mid-July of this year management used this strategy to acquire more than 775,000 square feet of property. Total expected investments for these assets should add up to $226.9 million. So far, the results have proved encouraging. In the latest quarter this year, IIPR generated revenue of $24.3 million.

This is nearly triple the $8.6 million seen the same quarter last year. Adjusted Funds From Operations (AFFO) in the latest quarter totaled $21 million, up from only $5.8 million seen in the first quarter last year. As long as tenants continue to pay the company’s expansion should continue.

A cannabis side play

A third way to play the cannabis market is through Scotts Miracle-Gro (SMG). Most investors will view Scotts as a garden supply business. That is where most of its $3.2 billion in sales came from last year.

What many investors don’t know is that the firm invests in the cannabis and hemp markets too. Its Hawthorne segment focuses on helping consumers grow plants indoor or in urban environments with little or no soil present. This includes flowers and vegetables, but another big application in recent years has been cannabis. It has a wide variety of offerings available for this market, including hydroponic growing systems.

In 2018, Scotts partnered with The Flowr Group to build a 50,000 square foot facility dedicated to cannabis R&D. Their work involves developing growing systems, testing plant genetics, and more.

The firm also has a hemp research facility located in Oregon. Earlier this year the company set up a $50 million venture capital fund, called 1868 Ventures, to invest in all-things cannabis and other company-related projects.

Potential Options Payoff in Post-Covid China Rebound

The Chinese economy is starting to show signs that it is rebounding better than other economies around the world. China was the first country that had to battle the COVID-19

Retirement Income Tip: Buy High-Yielding Dividend Stocks

Imagine a scenario where you can make money while you sleep. Sounds too good to be true, right? Enter high-yielding dividend stocks. Now, there are lots of stocks in the

Beat the S&P 500 with These Specific Stocks

Today I'm going to briefly discuss a major error that most stock market participants make on a regular basis and ways in which you can substantially increase your stock returns.

Iaccino: Dollar Down, Stocks Higher, Plus PayPal Meets Bitcoin

A renewal of federal stimulus on top of monetary stimulus after the election is likely to support the stock market, says Bob Iaccino, editor of the Stock Think Tank. The

investor or pay off debt

Invest or Pay Off Debt? In a Pandemic, I’m a Stock Buyer

If you were to tell someone that you were putting any extra cash you had into the market instead of paying off debt, they might think you have lost your

bitcoin mass adoption

Bitcoin Mass Adoption Can’t Be Far Off — That Means Surging Demand

When you look at past technological developments — from the 19th century industrial revolution through the introduction of the telephone, personal computers, Internet, and smartphones — there is a typical

stocks overvalued

Is the Stock Market Overvalued? Not By This Measure

You many have heard the term “TINA” mentioned in various financial and investment commentaries in recent months. This is an acronym for “There is No Alternative.” It is built around a

clx options

Options Play: Take Advantage of Bearish Sentiment On Clorox (CLX)

We are in the middle of a global pandemic and one of the best weapons against the virus is cleaning surfaces with bleach. If we were to ask 100 people

This Predicts Bitcoin Price — and It’s Uncannily Accurate

Many investment advisors are beginning to recommend some exposure to Bitcoin (BTC) and some alternative (alt) coins, such as Ethereum (ETH). But the biggest hurdle for many analysts is how

retail spending

Retail Spending Shoots Higher, Suggesting Stocks Will Follow

Data released today by the U.S. Department of Commerce indicate that sales at U.S. retail stores rose sharply during September. Specifically, that data indicate that U.S. retail stores rose during

technical analysis

Getting Started with Technical Analysis and Options Trading

You will likely hear about technical analysis during your trading experience. Technical analysis is a discipline that uses stock prices to determine signals on when to trade. Many people swear

ignore vix

Ignore the VIX. These Indicators Matter More.

As you probably know stock prices in general moved in a volatile sideways range over approximately the past five weeks and, looking forward, I expect stocks to continue to trade