The cannabis industry has been getting a whole lot bigger this year. With New York, New Mexico, and Virginia passing marijuana legislation already in 2021, 17 states have now legalized marijuana for recreational use. And that means the opportunities will only get bigger for cannabis companies to expand their reach and boost their sales.
For investors looking to add pot stocks to their portfolios, there are some great options to consider. Curaleaf (CURLF 7.52%), GrowGeneration (GRWG 3.09%), and Innovative Industrial Properties (IIPR 3.98%) are some of the most promising high-growth stocks in the industry, and they could all make for solid long-term investments.
Curaleaf belongs at the top of the list thanks to its status as (arguably) the top stock in the industry. It's my bet for the first marijuana company to reach the $1 billion revenue mark. Earlier this year, it hit a different milestone with the launch of its 100th retail location -- but this is not a management team that is content with the status quo. This month, Curaleaf closed on the acquisition of EMMAC Life Sciences, which it calls "the largest vertically integrated independent cannabis company in Europe." This will give it a presence in many attractive European markets, including the U.K., Germany, and Italy.
But it's not as if the company needs help finding ways to grow. On March 9, Curaleaf reported quarterly sales of $230.3 million for the period ended Dec. 31, marking growth of 205% year over year. And for 2021, the company is expecting another record-setting performance. Curaleaf is looking to take advantage of the new Arizona market and also hopes that recreational sales in New Jersey will commence later in the year.
And there are even more growth opportunities ahead. The adult-use market in New York will likely open up in 2022, and Curaleaf already has four dispensaries there. While the multistate operator doesn't list any locations in New Mexico or Virginia, it wouldn't be surprising to see that status change in the near future given the company's aggressive growth strategy.
With a current presence in 23 states, Curaleaf is in a great position to benefit from the industry's rapid expansion and looks to be an excellent buy for investors craving growth.
GrowGeneration isn't a pot producer, but it does benefit from the industry's growth. It can help growers and cultivators use hydroponics to grow cannabis more efficiently. Instead of requiring large spaces or even soil, hydroponics can help people grow plants through the use of pipes, pumps, and other components that can make the process a whole lot more efficient.
And the demand is certainly there; GrowGeneration has been achieving some impressive results. The company is coming off a strong 2020 in which sales of $193 million climbed 143% from the previous year. And while acquisitions and the opening of new hydroponic and gardening stores have helped give its numbers a boost, its same-store sales were also impressive, growing at a rate of 63%.
The big advantage GrowGeneration has over licensed producers is that it doesn't need to worry about federal legalization or which states allow pot. Since it only provides the tools to help grow crops, it isn't producing any marijuana and thus is not in violation of any federal laws. This gives it much more growth potential. And while there has been an uptick in gardening in general during the pandemic, GrowGeneration doesn't hide where much of its growth comes from, stating in its annual earnings report (released March 24) that "the products we sell are in demand due to the ever-increasing legalization of plant-based medicines, primarily cannabis and hemp, and the increasing number of licensed cultivation facilities in North America."
As that demand grows, so too will GrowGeneration's sales numbers, making the stock a great way to invest in the industry's expansion.
3. Innovative Industrial
Innovative Industrial Properties isn't a cannabis producer, either; it just needs growers to be successful because many of them are its tenants. As of the end of last year, Innovative Industrial Properties had four leases with Curaleaf and five with rival Cresco Labs.
The real estate investment trust (REIT) buys properties and leases them back to marijuana producers, giving those producers much-needed cash and stability while creating consistent recurring revenue for Innovative Industrial. As more markets legalize marijuana, more producers will be looking to sell their locations to free up cash to facilitate growth. Enter Innovative Industrial to capitalize on the situation and add to its list of properties.
In 2020, revenue totaled $116.9 million, a year-over-year increase of 161.7%. While REITs are normally more staid than this, Innovative Industrial has been rapidly adding to its list of properties. Last year, 66 properties contributed to its top line, up from 46 in 2019.
Another reason this is not your average pot stock: It pays a dividend. With a yield of 2.8%, it provides an even better payout than what you will get with the average stock on the S&P 500 (at 1.5%). And management has consistently been boosting the payout -- from quarterly payments of just $0.15 in 2017, the company now pays $1.32, a nearly ninefold increase in just four years.
Innovative Industrial can give you the best of both worlds, allowing you to grow your portfolio through both capital appreciation and dividend income. And it is also one of the safer ways to invest in the cannabis industry.