Today I’m doing something a little different — this ad from The Wealth Advisory about “The Only Pot Stock I Will Ever Own” has been getting a lot of attention from readers and driven a lot of questions our way, so here I’m re-posting for all readers a Friday File piece that I wrote about this one when I first saw the ad a little over a month ago.
Those who aren’t Irregulars (that’s our paid membership, they receive additional commentary each week) will note that I toss more opinion into my coverage for our paid members, and talk more about my portfolio and how I manage it. If you like that kind of thing, I humbly suggest that you join the ranks of my favoritest readers and be part of making sure that we can keep doing our thing here at Stock Gumshoe, explaining teaser stocks and revealing “secret” strategies… and if not, well, we love our free readers, too — thanks for sticking around!
This stock has been in my portfolio since January, and I have not adjusted my position since the below was written…
–from the 7/20/18 Friday File–
The Wealth Advisory is pitching “The Only Pot Stock I Will Ever Own” … and since that newsletter has been touting various REITs for quite some time, including CoreSite (COR), a stock I’ve owned for years and wrote about a few times when they were pitching it as a way to profit from Netflix and other tech giants, it probably won’t surprise you to learn that they’re again pitching a REIT to play a growth sector… and it’s again a stock I’ve also been buying, Innovative Industrial Properties (IIPR).
So I’ve gone and let the cat out of the bag there, but here’s a bit of the ad to give you a taste:
“5 Reasons This is the Profit Opportunity of the Decade
- It’s the Fastest-Growing Industry on the Planet
- It’s the Biggest Untapped Market in the World
- It Has No Competition
… there is not a single other stock exclusively dealing in cannabis real estate.
This company already provides more than half a million square feet of real estate to cannabis companies around the country, and that is steadily growing.
- It Has First-Mover Advantage
- Real Estate ALWAYS Pays
“At this point, we know pot companies will make us money.
“But there are so many ways to play it, it’s hard to say which avenue will yield the greatest profits.
“But if there is one thing I’ve learned from Briton in the last decade, it’s that real estate ALWAYS pays.”
So that’s their basic argument for this “only pot stock I will ever own” — and it’s similar to past newsletters who have touted this stock, calling it the “safest pot stock” and a way for the wimpy to play this scary sector.
Which I won’t argue too much about, though it’s still a small company, still could easily face lots of competition, and is reliant for its high-profit niche on a somewhat uneasy balance between marijuana being semi-legal and fast-growing.
If marijuana were a legal business at the federal level, marijuana growers would be able to borrow cheap from banks just like everyone else, and they wouldn’t have to make deals with folks like IIPR that include above-market rents and high returns… and if other folks come into this business because risk goes down, competition could absolutely eat into those returns as marijuana growers scale up.
I don’t know what value their “first mover” status will have in the future, but they are not doing anything unique or proprietary that other REITs couldn’t eventually mimic, and there are lots of competing companies pursuing similar “alternative financing” models for marijuana companies — including lots of unlisted privately-backed pools of capital — so we shouldn’t assume that IIPR gets to automatically “win” in the end… though they’re doing quite well so far.
Here’s some background on the company, and my current thinking on IIPR, for those who are curious…
Innovative Industrial Properties (IIPR) is a REIT that does financing deals and sal