With so many stocks trading down in recent months, the current market has understandably left many investors feeling less than enthusiastic about putting their money to work. However, if you’re investing in stocks for anywhere from three to five years, and potentially much longer, it’s always a good time to buy stocks capitalizing on long-term tailwinds with businesses that can support durable growth.
Let’s take a look at two such stocks that you may want to consider adding to your portfolio before the end of 2022.
1. Innovative Industrial Properties
Innovative Industrial Properties (IIPR) is one of the few marijuana stocks you can invest in that isn’t in the business of cultivating or selling the actual product. Innovative Industrial Properties is a real estate investment trust (REIT) that continues to derive substantial revenue and profits from the long-term, triple-net leases of high-end cultivation and industrial facilities it enters into with medical cannabis companies.
Innovative Industrial Properties’ tenants include such well-known names in the cannabis business as Trulieve, Curaleaf, and Green Thumb Industries. By focusing on the medical marijuana industry — which has achieved legalization much more rapidly and in nearly twice the number of states as adult-use cannabis — and only leasing out its facilities to licensed growers, the company has much less risk than a cultivator or retailer.
Notably, this business model also gives the company the ability to deliver more optimal returns with higher margins, which it continues to do year after year and quarter after quarter.
Its focus on the medical-use industry and long-term leases has also fueled strong revenue growth and profitability, as well as enabling the company to keep expanding its portfolio of properties. Currently, Innovative Industrial Properties holds 111 properties in 19 different states.
The most recent quarter saw it deliver year-over-year revenue growth to the tune of 32%, while its net income and adjusted funds from operations (FFO) — a key performance benchmark for REITs — rose by a respective 25% and 34%. Over the past five years, Innovative Industrial Properties’ annual revenue has risen by about 1,300%, while its annual net income and FFO have surged by about 1,500%.
Given that Innovative Industrial Properties is a REIT, it’s required to pay out at least 90% of its taxable income as dividends. Its current yield is more than 6%. Over the past five years, the stock has delivered a total return of about 680%. With such a robust core business and a strong history of enviable returns, it’s not inconceivable that this top pot stock could double in the years ahead.
2. Cresco Labs
For investors with a more robust risk appetite, Cresco Labs (CRLBF) presents a compelling buying opportunity within the broader cannabis sector.
Cresco Labs owns and operates a string of retail stores, as well as cannabis brands that sell both recreational and medical-use products. It currently holds 54 licenses across seven states, and its branded products include everything from gummies to vape cartridges to pre-rolls to concentrates.
In full-year 2021, Cresco Labs generated revenue of $822 million, 73% more than in 2020. For context, the entire U.S. market generated $25 billion in sales for full-year 2021. Over the trailing 12 months, Cresco Labs has increased its revenue and cash from operations by 81% and 22%, respectively.
A notable tailwind for Cresco Labs’ long-term growth is its pending acquisition of Columbia Care, a purchase that will give make the company the largest multistate-operator by pro forma revenue with the second-largest retail footprint in the country. Cresco Labs is already the top seller of branded cannabis products in the U.S., with market leadership in key categories including vapes and concentrates.
Cresco Labs’s shares have declined more than 50% this year, dragged down by the broader equity market slump and the reality that federal cannabis legalization may not occur anytime soon. However, for investors with the right appetite for risk, Cresco Labs’s leading market share and continued expansion in the fast-growing U.S. cannabis industry could offer an intriguing buying opportunity that could pay off in the years ahead.
— Rachel Warren
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Source: The Motley Fool