Got $5,000? Buy These 3 Hot Pot Stocks Immediately

With Republicans in the House of Representatives recently introducing legislation to legalize marijuana at the federal level, the potential for a bipartisan framework is as close as it’s ever been. While the patchwork quilt of state-by-state efforts is a workaround of sorts for a growing industry, it’s a poor substitute for a cohesive national policy.

The recent ruling by the South Dakota Supreme Court striking down a voter referendum approving legalized weed is a case in point. Cannabis has been a difficult market as a result, but three Motley Fool contributors think that Innovative Industrial Properties (NYSE:IIPR), the Horizons Marijuana Life Sciences Index ETF (OTC:HMLSF), and Jazz Pharmaceuticals (NASDAQ:JAZZ) are top buys right now. 

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Mastering the markets for cannabis real estate and growth financing

Alex Carchidi (Innovative Industrial Properties): When it comes to cannabis stocks with an evergreen appeal, it’s hard to beat Innovative Industrial Properties.  

IIP’s strategy is to build a real estate empire of cannabis cultivation facilities rather than to grow marijuana for consumers to buy. With a $51 million purchase of a new property in California on Oct. 18, its empire is growing by the month. But Innovative Industrial’s game is more than merely buying properties, because to generate cash flow from its holdings, it’s necessary to find tenants to rent them out. And who better to occupy a piece of productive real estate than the company that sold it to IIP in the first place? 

By purchasing spaces and then renting them out to the former owner in what’s called a sale-leaseback transaction, everyone wins. Innovative Industrial picks up a fresh asset, and the cannabis company gets a glob of badly needed cash, which it can then use to expand its operations.

Consistently building on rental income by buying new facilities is a business model that won’t ever grow old, at least as long as the marijuana industry continues to be blocked from accessing more traditional sources of financing like bank loans. And that rental income isn’t exactly small, either. IIP’s revenue grew by 56.9% year over year in the third quarter, which management estimates will result in a total of $195.5 million in 2021. 

Crucially, IIP also pays a juicy dividend that currently yields around 2.31%. While that yield may not seem like it’s so hot, consider that its dividend payment has grown from $0.35 per share in September of 2018 to reach $1.50 per share in September of 2021. If it keeps getting hiked at that insanely fast rate — and with its rental income exploding, it probably will — people who invest in IIP will be sitting on substantial returns in practically no time flat.

Image source: Innovative Industrial Properties.

Buy a benchmark

Eric Volkman (Horizons Marijuana Life Sciences Index ETF): In the ever-money-losing cannabis sector, eventually some companies will win, but many more…