Earlier this week, I visited one of the local cannabis dispensaries around me. I’m talking about the Fluent dispensary, in Lake Worth, Fla., and it had a nice touch of fun holiday spirit.
Here’s the display inside the store …
You can see it’s a Christmas tree ornamented with boxes of cannabis and CBD cartridges and tinctures. But did you catch the Hanukkiah? The teeny-tiny Hanukkiah?
Yeah, the Hanukkiah is hidden inside the “U” in Fluent.
The display is a lot of fun. And the folks at Fluent have good reason to be happy.
Fluent is owned by Cansortium (OTCQB: CNTNF). That’s a tiny company with great growth: It’s up 800% from its opening low on March 25.
Note: I am a Cansortium shareholder.
The stock’s big run brings me to my point: Cannabis investors have had a great year overall. A broad basket of cannabis companies is up 44% since the start of the year. That handily beats the 15% gain in the S&P 500.
But now, after such a big run-up, many people are wondering how to invest NEXT year. After all — 2021 is right around the corner.
I have three ideas for you. I’ll be brief …
1. Premium Weed
Cannabis “flower” — the stuff you smoke in a pipe or bong — is the most popular way to consume marijuana. And recent data shows that, even in the pandemic-driven recession, consumers are willing to spend more money on higher-priced flower.
Here’s a chart from MJBizDaily.com that shows what I mean …
As MJBizDaily reports:
Analysis of pricing data from five Western states provided by Headset, a Seattle-based cannabis analytics firm, show flower products priced at $40 or more have accounted for an increasing percentage of overall flower sales since January 2019.
So, if you do your research and find stocks of companies that sell premium cannabis, you should end up running smoke-rings around the also-rans.
2. Real Estate
Here, I’m talking about real estate investment trusts, or REITS, that cater to the cannabis crowd. They buy grow houses from the cannabis companies, then rent them back to them through triple-net leases. This gives the cannabis companies a pile of cash, and the REIT gets steady, long-term cash-flow.
There are a couple of cannabis-focused REITS. The biggest, and my favorite, is Innovative Industrial Properties (NYSE: IIPR).
And no wonder. In the last quarter, IIPR’s revenue skyrocketed 197% year over year to $34.3 million. The company acquired several new marijuana growth facilities, which it immediately leased to state-licensed cannabis producers under long-term contracts. It pays a big, fat dividend, and it keeps raising it regularly.
And it did all this while cannabis is illegal on the Federal level. Imagine what this company might accomplish when marijuana is fully legalized.
One last idea …
3. Play the Averages
Everyone wants to beat the market. But in cannabis stocks, you just need an “average” performance to do better than the S&P 500.
I mentioned earlier that a broad basket of cannabis companies is up 43% since the start of the year, handily beating the 15% gain in the S&P 500. I’m talking about my favorite cannabis stock ETF, the AdvisorShares Pure Cannabis ETF (NYSE: YOLO).
YOLO is outperforming. Not only that, most of that outperformance happened since the end of October. What a rocket ride!
Sure, we’ll see pullbacks. I’m counting on them. But I’m going to buy those pullbacks. And if you want a holly, jolly Christmas and a merry New Year, you’ll be buying, too.
Because, while 2020 has been a great year for cannabis, I strongly believe 2021 could be even better.
All the best,
Sean
