Bigfoot. The Loch Ness monster. Profitable pot stocks — All three things are rumored to exist but are very hard to find.
Investors have good news, though: It’s not impossible to find the third item on the list. While most cannabis-related companies remain unprofitable even when their sales are soaring, there are a handful of businesses operating in the cannabis industry that are actually generating solid earnings.
The five most profitable pot stocks on the planet (based on profit margin) right now are…
Innovative Industrial Properties (NYSE:IIPR), Constellation Brands (NYSE:STZ), Altria Group (NYSE:MO), Charlotte’s Web Holdings (NASDAQOTH:CWBHF), and Scotts Miracle-Gro (NYSE:SMG). They are ranked below in order of profit margin. Here’s why they’re making money while most other cannabis stocks aren’t.
1. Innovative Industrial Partners
Innovative Industrial Partners (IIP) ranks at the top of our list with a profit margin of more than 51%. The company operates as a real estate investment trust (REIT) and focuses on leasing properties to the medical cannabis industry.
The secret to IIP’s terrific profit margin is that it leases out 100% of the 19 properties that it owns. The weighted-average remaining lease term for its properties is over 15 years. These long-term leases give the company ample cash to reinvest into additional properties to lease out. This “rinse and repeat” formula enabled IIP to increase its net rental revenue by 146% and its earnings by 444% year over year in the first quarter of 2019.
2. Constellation Brands
Constellation Brands qualifies as a pot stock thanks to its 38% ownership of leading Canadian cannabis producer Canopy Growth (NYSE:CGC). But while Canopy Growth isn’t profitable yet, Constellation is. The company’s profit margin tops 42%.
Premium beers like Corona and Modelo have fueled Constellation’s nice profits. Overall beer sales in the U.S. are falling, but Constellation’s product lineup has been able to buck the trend. The company’s beers drove 40% of the growth in the U.S. high-end beer category last year and all of the growth in the import segment. Constellation thinks that its expansion into the cannabis industry will help it deliver even bigger profits…
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