Since at least the 1920s, the tide of history proves that if you want to accumulate vast amounts of wealth, investing in stocks is the way to go. Gold, bonds, real estate, or some other asset class might outperform over shorter periods of time, but over decades, the stock market wins out.
A recent study by Deutsche Bank showed equities beat out gold by 5.6% per year over the past century, and topped housing prices by 6.6%, Treasuries by 6.8%, and oil by 8.4% per year.
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Marijuana investors should be similarly rewarded for their patience if they buy into top cannabis companies and then hold onto them for decades. While the Horizons Marijuana Life Sciences ETF is down 2% since it was created in 2017, compared to a 98% gain by the broad market index, cannabis' greatest potential is still in the future.
Marijuana is now legal in 18 states, the District of Columbia, and four U.S. territories, and cannabis-focused analytics firm BDSA projects annual pot sales will double between 2021 and 2026, hitting $48 billion. And that's even before federal legalization occurs, which could happen as soon as next year.
Instead of putting your money to work in assets that don't have the proven track record of stocks, I'd suggest investing in the following cannabis stocks, both of which you can buy and hold for the next decade.
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Industrial Innovative Properties
Launched in 2016, Innovative Industrial Properties (IIPR 1.04%) is a real estate investment trust (REIT) that specializes in the medical marijuana field. First to market, it is the leading REIT when it comes to owning, managing, leasing cultivation, and processing properties.
Innovative Industrial owns 76 properties across 19 states, representing some 7.5 million square feet of rentable space, 100% of which was completely leased to state-licensed marijuana growers for an average period of 16.7 years.
That's important for investors because it ensures the REIT will have a steady stream of revenue well into the next decade, and very likely well beyond. Moreover, Innovative Industrial passes along annual rent increases to its tenants while collecting property management fees through its sale-leaseback program.
Until legalization is passed at the federal level, the REIT is ensured of having a ready list of customers willing to participate in the program to access financing. Because traditional banking and financing is closed off to pot stocks, Innovative Industrial is a go-to source.
Multi-state operators (MSOs) PharmaCann and Cresco Labs are two of its largest tenants representing 13% and 8%, respectively, of total rental revenue, but it counts some of the fastest-growing cannabis companies as customers, including Columbia Care, Green Thumb Industries, and Trulieve Cannabis.
As REIT, Innovative Industrial is obligated to return 90% of its profits back to its shareholders and has quadrupled its dividend since going public. In fact, it's increased the payout 11 times since it first initiated the dividend, which now yields 2.3% annually, higher than S&P 500's current average of 1.3%, making it one to buy and hold for decades to come.
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Jushi Holdings
Unlike other MSOs, Jushi Holdings (JUSHF -0.71%) is taking a focused approach to growth, targeting specific states that allow for the best chance of profitable expansion.
Primarily, Jushi has a three-state scope covering Pennsylvania, Illinois, and Virginia. It has 26 operating dispensaries, mostly in those states, but it can open an additional 10 retail locations across a handful of states based on the license approvals it has available. Jushi also has a cannabidiol store in New York and two dispensaries in Massachusetts, along with five cultivation locations and five extraction and processing facilities.
What these states have in common is they're largely limited license states, or places where either state or local governments limit the number of operators that can legally be in business, or the number of licenses an operator can hold. The company is also looking to expand into Ohio, California, and Nevada.
That government-enforced restriction on competition, however, will allow Jushi to develop a loyal customer following and build up its brands, such as The Lab and Tasteology. It also has two in-house flower brands, called The Bank and Sèche.
In the second quarter, which ended June 30, Jushi posted 15% revenue growth to almost $48 million, 78% of which was made online. Last month it even hit a $1 million online pre-order daily sales record.
Despite a lack of access to traditional banking services, Jushi looks to be well-capitalized with $127 million in cash and only $85 million in debt. It recently secured a $100 million secured credit facility from SunStream Bancorp, a joint venture sponsored by Sundial Growers, and plans to use $40 million of the proceeds to fund a portion of its recent acquisition of Nature's Remedy of Massachusetts. It may draw down additional amounts for other strategic expansion opportunities.
Jushi management is guiding for $220 million to $230 million in revenue for 2021, with adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) of $32 million to $37 million.
Wall Street, though, forecasts the MSO will more than double revenue by 2023, to $520 million, and then increase it another 75% to $914 million one year later. With nearly $1 billion in sales in just a few years' time, Jushi Holdings is one of the fastest-growing marijuana stocks that you should hold onto well into the next decade and beyond.
