Investing isn't rocket science, but it takes considerable patience and fortitude to stick with your investing journey and ride out the highs and lows that the market will inevitably bring with the passage of time. Whether you're brand new to investing or have been in the market for many years, you're not alone if you've found yourself struggling to stomach the volatility that the market has presented investors with over the past year.
Still, businesses on solid growth trajectories with clear paths forward to growth ahead are making themselves known and delivering results that can lay the groundwork for a robust share price recovery in a prolonged bull market environment. Here are two such names to consider for your buy list right now.
1. Innovative Industrial Properties
Innovative Industrial Properties (IIPR 0.06%) is one of the few cannabis stocks that I regularly cover and find to be an intriguing investment, even against the current volatile backdrop of the marijuana industry. And there's no denying that the cannabis space is continuing to face its fair share of headwinds. Varying U.S. state legalization, lack of progress on the U.S. federal level, and an oversupply of the product that has heavily depressed marijuana prices in recent months have weighed on the top and bottom lines of many companies with exposure to this industry.
However, in the case of Innovative Industrial Properties -- a real estate investment trust (REIT) that leases its portfolio of properties solely to state-licensed medical cannabis growers -- the business has continued to rake in revenue and profits. This is despite the fact that a few well-known tenants have defaulted on their rent in the last year. Innovative Industrial Properties has a very distinctive business model that is driving this resilience, largely going back to its lease structure and the composition of its tenant portfolio.
The company buys industrial facilities from medical marijuana businesses like Trulieve and Curaleaf and rents them back to these entities under triple net lease arrangements, under which the tenant takes on virtually all the costs associated with operating the property. The average length of these leases is 15 years. And Innovative Industrial Properties has done such a good job of diversifying its operating portfolio that no tenant accounts for more than 14%, and no state more than 16%, of its holdings.
In 2022, Innovative Industrial Properties brought in revenue of $276 million, while adjusted funds from operations hit $234 million and net income totaled $153 million. These three figures represented increases of 35%, 34%, and 36%, compared to 2021. When the company reported its 2022 earnings at the end of February, it had collected 92% of its rental revenues for the month, and it consistently reports rental collection rates in the 90th percentile range. The stock yields 9.8% at the time of this writing, while its dividend has increased 16% over the last year alone.
This isn't a stock for risk-averse investors. However, if you're looking to gain some exposure to the potential of the marijuana industry without taking on the same risk as a pure-play, this REIT could be worth a second look to add to a well-diversified portfolio and yield some dividend income in the process.
2. Chewy
Chewy (CHWY -3.27%) continues to capitalize on the growth opportunity that the multi-billion-dollar pet care industry presents, including both consistent and fluctuating sources of pet owner spending. The company sells the more traditional pet items, like food, bedding, and toys. It also sells products geared toward larger animals like farm animals.
But this is just the tip of the iceberg. With a growing collection of products and services ranging from on-demand pet telehealth and a range of pet health insurance plans to a full-service online pharmacy and its own pet supplement line, Chewy is diversifying its sources of revenue and profits while building out its competitive edge for the long haul. And this strategy seems to be working.
Net sales surpassed the $10 billion mark in 2022. Meanwhile, the 12-month period saw Chewy rake in just shy of $50 million in profits and $120 million in free cash flow. Autoship sales -- in short, recurring subscription-based revenue -- continue to account for more and more of Chewy's overall sales: 73%, in fact, for the full-year 2022.
Chewy is also boosting its growth opportunity and long-term growth potential as it advances its automated fulfillment center network. The company plans to launch a fourth automated fulfillment center in the coming months, out of its network of 13 total fulfillment centers. As of the end of 2022, 30% of Chewy's order volume was being processed through its automated facilities. This is a business that hasn't come close to realizing its full growth potential. Given the broad tailwinds driving the pet care industry, Chewy looks to be an ideal position to capitalize on them.
