If you'd invested $1,000 in Canada-based vegetable-grower-turned-cannabis-focused-grower Village Farms International (VFF 1.85%) at the start of this year, your investment would now be worth $2,940. And if you had chosen to plunk that grand down at the same time on cannabis-focused real estate investment trust (REIT) Innovative Industrial Properties (IIPR -1.26%), you'd have exactly doubled your money.

These would certainly be fantastic returns in any market, but they're particularly noteworthy when you consider that the broader market has returned 20.1% over this period and the overall cannabis sector has been struggling. Indeed, shares of the three largest Canadian cannabis growers -- Canopy Growth, Aurora Cannabis, and Cronos Group -- have all lost ground in 2019. They're down about 10%, 3%, and 10%, respectively. 

Let's look at what's happened with Village Farms and Innovative Industrial Properties this year to cause investors to drive up the prices of their stocks, with an eye toward determining if they still look like attractive buys today.

A cannabis plant with an upward-pointing arrow superimposed on it.

Image source: Getty Images.

Village Farms

In 2017, Village Farms entered the marijuana-growing business via its Canadian Sunfarms joint venture (JV) with medical marijuana company Emerald Health Therapeutics (EMHT.F). But Village Farms is no newbie to agricultural operations. It's one of the largest and longest-operating greenhouse growers in North America, with 30 years of experience growing produce such as tomatoes and cucumbers. It operates huge greenhouses in its home turf of British Columbia and in Texas. 

Investors have been enthused about the JV's progress. Earlier this year, Sunfarms completed converting one of Village Farms' three Canadian greenhouses into a cannabis-growing facility and has recently exercised its option to do the same with a second one. Additionally, investors have reacted positively to news of the company's recent entrance into the U.S. hemp market, which opened on Jan. 1. Within this realm, Village Farms has formed two joint ventures and has begun converting part of its West Texas greenhouse into a hemp cultivation and cannabidiol (CBD) extraction facility. 

Moreover, investors have no doubt driven Village Farms' stock higher in 2019 in part because they've been pleased with the company's financial results. Village Farms was profitable in its most recently reported quarter, thanks to its cannabis operation, while most growers are drowning in a sea of red ink.

Innovative Industrial Properties

Innovative Industrial Properties, based in San Diego, buys properties in U.S. states where medical marijuana is legal and leases them to state-licensed operators, which use them to grow and process marijuana. Since the company is organized as a real estate investment trust (REIT), it must pay out at least 90% of its income to shareholders as dividends in return for special tax treatment. Shares are currently yielding 3.3%.

The company currently owns 30 properties located in 12 states totaling approximately 2.2 million square feet, which are 100% leased under long-term, triple-net leases. Its portfolio is yielding about 14.5%. 

It's easy to understand why investors have driven shares of IIP, as the company is often called, up in 2019. It's been growing revenue, earnings, and funds from operations (FFO) -- a key metric for REITs that drives dividend changes -- at a rapid clip. In the second quarter, its revenue soared 155%, earnings per share (EPS) surged 76%, and adjusted FFO jumped 90% year over year. Moreover, Wall Street expects continued strong growth, with analysts projecting EPS to grow 128% this year and 74.3% in 2020.

Are Village Farms and Innovative Industrial Properties stocks worth buying now?

IIP stock is a good choice for many investors who want exposure to the cannabis space, as it's relatively low risk for this sector. Not only is it profitable, it's profitability growth has been strong, and it pays a dividend.

Village Farms stock is only suited for investors comfortable with a high degree of volatility and risk, as it -- along with the vast majority of cannabis stocks -- can be expected to be quite volatile. The company is competing against a number of much bigger players that have significantly greater financial resources, which poses a significant risk. I own the stock, so I obviously like its prospects, but my position is very small.