Following a miserable May that saw nearly three dozen pot stocks lose at least 10% of their value, June was nominally nicer to the green rush. The Horizons Marijuana Life Sciences ETF, an exchange-traded fund holding more than four dozen cannabis stocks of various weightings, rose by a modest 2%.
Then again, the data on individual stocks wasn’t as pretty. Of the 60 I follow, just 21 ended the month of June higher (two were unchanged, as well). Pessimism was still readily apparent, but it was the most popular pot stocks — those generally weighted higher in most marijuana ETFs — that shone the brightest.
Below you’ll find the six best marijuana stocks from June, as well as the likely reason(s) behind their ascent…
Innovative Industrial Properties: Up 47%
Cannabis real estate investment trust (REIT) Innovative Industrial Properties (NYSE:IIPR) was the first pot stock to list on a major U.S. exchange. A regular on the top-performers list, IIP was June’s best pot stock, with a gain of 47%.
Last month the company acquired its 22nd property, doubling the number of properties it began the year with. Aside from that, the big catalyst was Innovative industrial’s mid-month announcement that it was raising its quarterly dividend by 33% to $0.60 per share, for 140% year-over-year growth from its payout in the same quarter last year.
Innovative Industrial Properties benefits every time it adds new assets to its portfolio. Given its average annual return on assets, typically around 15% for many of its deals, observers expect it’ll take less than five years for the company to receive a complete payback on its investments.
The only downside to this acquisitive growth is that rental income alone doesn’t provide enough capital to make many purchases. Instead, IIP sells its stock to raise money, thereby diluting existing shareholders. Long-term investors should be well aware of those occasional sales of stock to boost capital, and the negative near-term impact they can have on the company’s share price.
Tilray: Up 23%
Popular but polarizing pot stock Tilray (NASDAQ:TLRY) was the second-best performer in June, with a 23% monthly gain.
The bulk of Tilray’s gains came on June 10, when it announced it would be acquiring private equity firm Privateer Holdings in a downstream merger. Privateer currently holds 77% of Tilray’s outstanding shares; the concern on Wall Street had been that, even with a voluntary lock-up extension from Privateer on Tilray’s stock until the second half of 2019, there would be no orderly way for Privateer to sell down its position without putting serious pressure on Tilray’s share price. With Tilray now controlling that sale process over a two-year period, there’s no longer any worry about a surprise insider rush for the exit.
Nevertheless, Tilray’s solid June doesn’t mask its other issues. One is that its strategy shift to focus on Europe and the U.S., instead of Canada, comes at a time when Canada’s recreational weed market is just ramping up. While this could wind up being a smart move for Tilray over the longer run, given the larger peak sales potential of Europe and the U.S. relative to Canada, it means pushing any shot of profitability for the company out at least another year. That makes Tilray an easily avoidable marijuana stock, in my view…
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