If you're looking for stocks that you can buy and hold for many years, it's important to choose companies with high-quality businesses and strong catalysts for growth. One industry that receives ample attention from investors of all ages and trading styles is the marijuana sector.
As more states have legalized pot for medical and recreational purposes, growers, retailers, and ancillary providers have popped up right and left. Legal cannabis sales in the U.S. shot up nearly 50% in 2020. And the global legal marijuana market is on track to reach a valuation of nearly $71 billion as soon as 2028.
Not all pot stocks are great investments. Some of the marijuana companies that have elicited the most investor hype simply don't have the financials to back up the enthusiasm they've generated. But there are excellent stocks in the pot sector that investors with a buy-and-hold perspective shouldn't hesitate to jump on right now. The following three stocks are such companies.
Image source: Getty Images
1. GrowGeneration
GrowGeneration (GRWG 0.90%) is an interesting play within the marijuana space because the company doesn't actually sell cannabis. What it does sell is a vast assortment of just about any farm supplies an operator would need to grow and harvest marijuana. GrowGeneration currently operates 62 garden centers across the U.S., with heavy concentration in key markets including California and Colorado.
As you might imagine, the explosive growth the marijuana industry is experiencing has translated to fantastic revenue and profits for GrowGeneration. Shares are up more than 50% over the past year alone, and just under 1,000% since the stock went public less than five years ago.
In the most recent quarter, the company reported that its revenue jumped 190% year over year, and its net income by 161%. Over the past five years, the company has increased its annual revenue and net income by 143% and 303%, respectively.
GrowGeneration has abundant room left to expand its operations and juice out more profits from new and existing operators around the country that rely on its garden centers to get the product from greenhouse to dispensary. This is a stock that has plenty of room left to soar, and it's a great play in the marijuana space for investors of all risk tolerances.
2. Jushi Holdings
Jushi Holdings (JUSHF 4.00%) owns and operates a chain of cannabis dispensaries, retailers, and cultivation and production facilities across the U.S. It also has an e-commerce side, where its selection includes branded apparel, edibles, and vape products from its group of specially curated brands.
The company habitually acquires new facilities and retail dispensaries, and it closed purchases in both Massachusetts and Nevada in September. The company also opened its 15th retail location in Pennsylvania in September, a medical-use state where cannabis sales are expected to reach as much as $925 million in 2021.
Jushi's revenue jumped 220% in the second quarter of 2021 year over year. The company's bottom line improved by nearly $32 million compared to the net loss of about $27 million it reported in the first quarter despite a number of recent costly acquisitions. This brought its second-quarter net income to $4.8 million.
The stock is up about 75% from 12 months ago, and Wall Street thinks the company could have upside potential as high as 160% over the coming year. If you're a more risk-averse investor, you can easily scoop up some shares at less than $5 each while maintaining the stock as a smaller position in your portfolio.
3. Innovative Industrial Properties
If you're an income-seeking investor looking for a pot stock that has a history of high growth and an equally bright future, Innovative Industrial Properties (IIPR 1.78%) certainly hits the bull's eye on all requirements.
The stock pays a dividend that yields 2.36% at the time of this writing, and because Innovative Industrial Properties is a real estate investment trust, it's legally compelled to pay a minimum of 90% of its taxable income to its shareholders as dividends. As Innovative Industrial Properties' revenue and profits have surged year after year and quarter after quarter, so has its dividend (the most recent dividend boost was an incredible 28% year over year).
The company leases its rapidly expanding portfolio of properties to licensed medical cannabis growers. It has an impressive list of clients that rent facilities spanning from California to New York. These include well-known names in medical-use cannabis like Green Thumb Industries, Trulieve, Cresco Labs, and my previous pick, Jushi Holdings.
This year, Innovative Industrial Properties reported revenue increases of 103% in the first quarter and 101% in the second versus the same quarters in 2020. Its net income jumped 122% and 124%, respectively, during these two quarters. And for an even more accurate assessment of the REIT's earnings over the past two quarters, its adjusted funds from operations (AFFO) jumped 116% in Q1 and 104% in Q2.
In the world of pot stocks, numbers like these don't grow on trees. Investors who want to pump some growth into their portfolio should definitely consider Innovative Industrial Properties for a long-term investment.
