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Tuesday, September 27, 2022

This may be the biggest money-making opportunity of the decade

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A change in thinking often occurs during periods of stock market volatility. Some investors are shifting from focusing on making money to trying to avoid losing money.

But the problem is that times like these can offer great ways to profit – if you keep your eyes open. There is a certain area that many investors avoid or at least ignore that could prove to be very profitable over the next few years. It could even be the biggest money-making opportunity of the decade.

down but not out

Curious to know what the mysterious investment opportunity is? Let’s get to the chase: It’s cannabis.

You may be skeptical. thats understood. Cannabis stocks have been overestimated in recent years. Some of the reviews have become absolutely ridiculous. When the cannabis industry experienced serious imbalances between supply and demand, most cannabis stocks crashed. performance ETFMG Alternative Harvest ETFone of the largest Marijuana ETFs In the market, he shows how the story ended.

MG data by YCharts

However, the cannabis market is not just a novelty. Market researcher BDSA estimates that the global legal cannabis market reached $30 billion in 2021. The United States accounted for $25 billion of this total.

To be sure, the explosive growth seen in the early days of cannabis legalization was in the past. But the BDSA predicts that the global cannabis market will nearly double to $57 billion by 2026. Other analysts believe the market could grow at a faster rate.

Possible ways to make money

It is not always easy to identify potential long-term winners in a rapidly growing market that is still in its infancy. But there are a few companies that are most likely to succeed.

Crisco Laboratories (CRLBF -8.12%) It is on track to soon become the largest cannabis company in the United States based on revenue. The multi-state operator hopes to Completion of the acquisition process Colombia care By the end of 2022. Once the deal closes, Cresco will operate more than 130 retail stores in 18 markets, including all of the 10 fastest growing cannabis markets with projected annual revenue of more than $1.4 billion.

The company already ranks as the number one wholesaler of branded cannabis products in the United States, and has the highest market share in cannabis product categories including flowers, concentrates, and vapors.

Innovative industrial properties (IIPR -5.98%) (IIP) is the leading real estate investment trust (IIP).Rit) Serving the cannabis industry. The company currently owns 111 properties in 19 states.

Cannabis operators sell their property to IIP and then lease it out on long-term leases. This model has proven to be very profitable for IIP as its profits have increased more than 90x over the past 5 years. As the US cannabis market expands, international investment must also grow.

Scotts Miracle-Grow (SMG -4.84%) It is famous for its lawn and garden products. However, the company’s Hawthorne segment is also the largest provider of hydroponic products to cannabis operators.

Hawthorne isn’t the growth engine it once was for Scotts, mainly due to oversupply issues affecting the US cannabis industry. However, the business should have strong long-term prospects.

Headwinds in the short term

Cresco is trading at less than 1.3 times sales. This measure does not reflect the significant increase in revenue that the company would receive once its acquisition of Columbia Care closed. IIP yields forward earnings of as little as 14.6, which is low for a company with a fast growth rate. Scotts Miracle-Gro stock is trading at just 12.9 times expected earnings.

These lower ratings reflect the current headwinds of the cannabis industry. Oversupply has negatively affected the growth of cannabis operators such as Cresco. It affected the ability of at least one of the IIP tenants to pay rent. It hurt sales of hydroponics products for the Hawthorne unit in Scott.

However, supply and demand imbalances work to resolve them over time. It is almost certain that the cannabis market will continue to grow strongly. Cannabis really could be the biggest money-making opportunity of this decade – or at least one of the best.

Keith Spetses He has positions in innovative industrial real estate. Motley Fool has positions at Cresco Labs Inc. Innovative Industrial Property, and Scotts Miracle-Gro recommends it. Motley Fool has a profile Disclosure Policy.



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