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IIPR Stock: Why You Should be Watching This Cannabis REIT

With more states planning to legalize cannabis soon, is it time to buy with IIPR stock hitting a new 52-week low?
The post IIPR Stock: Why You Should be…



Despite explosive industry growth, many marijuana stocks are down this year. But, one cannabis company, Innovative Industrial Properties (NYSE: IIPR), offers a unique way to invest. With IIPR stock down 55% this year, it’s the perfect time to add to your watchlist.

Innovative Industrial Properties is a cannabis REIT. The company buys properties and then rents them to licensed operators. In fact, IIPR was the first public company on the NYSE to provide real estate to cannabis companies.

Although IIPR stock has lost more than half its value this year, the company is expanding quickly. For example, in 2021, it bought 37 new properties.

A shifting opinion on cannabis use is helping the market build momentum. With more states planning to legalize it soon, experts believe it will continue. Is it time to buy with IIPR stock hitting a new 52-week low?

Here are a few reasons to watch Innovative Industrial Properties stock while it’s down.

No. 4 Growing Interest in Cannabis

Over the past few years, the public view of cannabis has changed greatly. For one thing, cannabis-based medicines treat several conditions like seizures or anxiety.

Furthermore, policy changes are creating a better image for the plant. Here are a few facts to illustrate.

  • A 2021 poll from Gallup shows a record 68% of Americans support legal marijuana.
  • A survey from the PEW Research Center shows that 91% of U.S adults support cannabis use.
  • Cannabis sales climbed 30% last year, outpacing coffee giant Starbucks (NYSE: SBUX).

In comparison, in 2003, more than 60% of Americans were against it. And the momentum is expected to speed up in the next few years.

U.S cannabis sales expect to reach $46B by 2026, 91% growth from 2020. Not to mention all 50 states expect to have medical cannabis by 2025.

Currently, 37 states, including Washington D.C, have laws allowing medical cannabis. Additionally, another 18 have fully-legal cannabis. With this in mind, the company is taking full advantage of the booming market.

For example, in the past two years, IIPR has grown its number of properties by 65%. On top of this, it has expanded into two more states, gaining six new tenants.

Most importantly, the company has the formula to continue building momentum.

No. 3 Innovative Industrial Properties Has an Advantage

The cannabis real estate business is not as easy as it may look. For one thing, it can be expensive. You need special lighting and equipment. Not to mention raising funds for the industry is still illegal since federal laws prohibit it.

But, IIPR has a way around it. To explain, the company buys properties with state-licensed operators leasing the buildings.

Then, the cannabis REIT leases back the real estate. As a result, cannabis companies can use the funds to expand and create higher returns in the long run. Moreover, it creates a steady revenue source.

The company generally works with 15- to 20-year initial leases. Before IIPR buys a building, they first make sure it passes all the licensing, zoning and regulatory hurdles.

And lastly, IIPR uses triple-net leases. In this type of lease, tenants are responsible for property costs such as repairs, maintenance and taxes.

No. 2 IIPR Stock Is Down 60% From Its Highs Despite Growth

After gaining over 600% from its pandemic lows, IIPR stock reached an all-time high above $288 per share. But, since then, IIPR stock price has slipped 55%.

At the same time, the company is growing rapidly. Innovative generated $64.5M in the first quarter, a 50% increase from last year. Net income also rose 36%, reaching $34.7M, or 1.32 EPS.

Yet the biggest storyline continues to be the company’s growth rate. The company bought 37 buildings last year and another six in 2022.

Meanwhile, the most recent comes as IIPR buys a property in Texas. The company, Texas Original, is one of the only state-licensed companies operating in Texas. With this in mind, the cannabis company expects to control a large part of the market.

So far, IIPR is doing a great job positioning itself for future growth in big market areas. On top of this, it works with some of the top businesses in the industry.

No. 1 Working With Top Cannabis Companies

IIPR is building a portfolio of top-tier tenants. For example, the company’s top ten clients by investment include:

  • PharmaCann – 12.4%
  • Parallel – 9.6%
  • Ascend Wellness – 9.4%
  • Kings Garden – 7.4%
  • Columbia Care – 7%
  • Trulieve – 6.7%
  • Green Thumb – 5.7%
  • Cresco Labs – 5.7%
  • Holistic Industries – 5.7%
  • Curaleaf – 5.1%

The top ten clients make up 75% of the company’s revenue. Some companies are public, others are private, and all (excluding Kings Garden) are in over five states.

In fact, the cannabis REIT has properties across 19 states, with Pennsylvania, Michigan and Illinois making up the majority. In fourth is California, the largest legal marijuana market in the world.

IIPR Stock Forecast: What to Expect

If you are reading this far, you are about to get to the best part. IIPR stock is also a high-yield dividend stock.

Investors can earn a massive 6.46% yield with IIPR stock currently. After raising the payout this past quarter, IIPR pays a quarterly dividend of $1.75. In other words, you earn $7 annually for holding IIPR stock.

As the cannabis industry continues growing, IIPR is taking advantage. Providing real estate and funding can help stimulate the companies they lease to.

Additionally, investing in cannabis companies often comes with varying earnings and strong competition. IIPR offers another way to invest in the growth. With steady revenue and a generous dividend, IIPR stock is a unique marijuana play.

Between shifting public opinion of cannabis and limited access to capital IIPR stock is a REIT you will want on your watchlist this year. Look for the company to continue riding the cannabis wave as the market builds momentum over the next few years.

The post IIPR Stock: Why You Should be Watching This Cannabis REIT appeared first on Investment U.

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Zillow Case-Shiller Forecast for May: Slowing House Price Growth

The Case-Shiller house price indexes for April were released this week. The “April” report is a 3-month average including February, March and April closings.  So, this included price increases when mortgage rates were significantly lower than today. Th…



The Case-Shiller house price indexes for April were released this week. The "April" report is a 3-month average including February, March and April closings.  So, this included price increases when mortgage rates were significantly lower than today. This report includes some homes with contracts signed last December (that closed in February)!

Zillow forecasts Case-Shiller a month early, and I like to check the Zillow forecasts since they have been pretty close.

From Zillow Research: April 2022 Case-Shiller Results & Forecast: Putting on the Brakes
With rates continuing their steep ascent and inventory picking up in months since, April is likely the first month of this deceleration as buyers balked at the cost of purchasing a home and pulled out of the market, leading to slower price growth. While inventory is improving, there is still plenty of room to go before it reaches its pre-pandemic trend. Still, coupled with relatively strong demand, that will continue to be a driver for sustained high prices even as sales volume is dropping in response to affordability constraints. As a result, more buyers will take a step to the sidelines in the coming months, which will help inventory to recover and price growth to slow from its peak, leading the market back to a more balanced stable state in the long run and providing more future opportunities for homeownership for those priced out today.

Annual home price growth as reported by Case-Shiller are expected to slow in all three indices. Monthly appreciation in May is expected to decelerate from April in both city indices, and hold in the national index. S&P Dow Jones Indices is expected to release data for the May S&P CoreLogic Case-Shiller Indices on Tuesday, July 26.
emphasis added
The Zillow forecast is for the year-over-year change for the Case-Shiller National index to be 19.5% in May. This is slightly slower than in February, March and April, but still very strong YoY growth.

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Spread & Containment

Airline stocks have been beset by external problems but could now be a good time to invest in a sector many think is in crisis?

It’s fair to say it has been a tough couple of years for the commercial aviation sector and investors in airline stocks. In 2019 the sector enjoyed record…



It’s fair to say it has been a tough couple of years for the commercial aviation sector and investors in airline stocks. In 2019 the sector enjoyed record passenger numbers and 2020 was expected to be better yet. Low cost airlines were expanding aggressively, as they had been for years, and national carriers, in response, had made strides in cutting costs and introducing other efficiencies.

Then the Covid-19 pandemic struck, devastating the sector. Over the early part of the pandemic when international travel was severely restricted, airlines operated skeleton schedules. Severely reduced capacity, and schedules regularly interrupted by new lockdowns and shifting government policies bedevilled the sector for the next two years.

Even over the past few months which have seen most pandemic-related travel restrictions drop, a spate of new problems has hampered the sector’s recovery. Staff shortages, the result of a combination of the continuing need for those that become infected with Covid-19 to isolate and a tight labour market, have been a major headache. London-listed easyJet recently cut its capacity forecasts as a result of staffing issues.

And last week over 700 Heathrow airport staff voted to strike over the peak summer period, which promises chaos, and hundreds of cancelled flights, if an agreement can’t be reached over pay in the meanwhile. Staff at three Spanish airports are also calling for industrial action this summer and strikes are a threat elsewhere around Europe’s favourite holiday destinations.

Sky high fuel costs will also put pressure on margins this summer and potentially well into next year and a growing cost of living crisis sparked by inflation levels at 40-year highs will not help demand.

Airline share prices have predictably slumped since the onset of the pandemic. EasyJet’s valuation is down over 50% in the past year and over 75% since summer 2018. Its shares haven’t been worth as little as they currently are since early January 2012.

easyjet plc

Hope on the horizon?

But despite the fact the immediate future still looks tough for airlines, there are a number of reasons why investors might consider dipping into their stocks now or in the months ahead.

The first is that the bulk of the problems that have crushed airline valuations over the past couple of years have been external factors outwith control and unrelated to the underlying quality of companies. They are also all problems that are expected to be temporary and will ease in future. Covid-19 restrictions are, with the notable exception of China, no longer a big issue and hopefully won’t return. And even China recently reduced its mandatory quarantine period for anyone arriving in the country from two weeks to seven days.

That’s still problematic but a sign that an end to the dark cloud of the pandemic may finally be in sight. Most airlines were forced to either take on significant new debt or raise cash through equity issues that diluted existing shareholders, or through mechanisms such as selling and leasing back aircraft.

It will take time for that gearing to be unwound and balance sheets brought back to health. But the sector will eventually recover from the pandemic which should see higher valuations return, providing a buying opportunity at current depressed levels.

Airlines that have come out of the pandemic in the strongest positions will also likely gain market share from weaker rivals, improving their future prospects. British Airways owner IAG, for example, currently has access to more than £10 billion in cash after raising capital to cover losses over the pandemic. EasyJet has access to £4.4 billion. That means both should be well placed to cover any continuing short term losses until passenger numbers return to 2019 levels and push their advantage over less well-capitalised rivals.

Both IAG and easyJet have also seen their passenger capacity improve significantly in recent months. Over the all-important summer quarter to September, the latter expects its passenger capacity to reach 90% of 2019 levels despite the ongoing operational challenges. IAG expects to return to 90% of 2019 capacity over the last quarter of the year.

A full recovery to 2019 levels is possible by next year even if higher costs are likely to mean ticket price increases are inevitable. That does pose a risk for near-term leisure travel demand but there is confidence that remaining pent-up demand from the pandemic period will help soften the impact on discretionary spending on international travel that might have otherwise been more pronounced. Western consumers have also, the pandemic period apart, become so accustomed to taking foreign holidays that some analysts now question if they should still be considered discretionary spending rather than a staple.

Despite the transient and external nature of the problems that have hit easyJet’s valuation, not all analysts are convinced the current share price offers good value even despite its depressed level. They still look relatively expensive given the risks still facing the sector at a forward price-to-earnings ratio of close to x160.


IAG could offer better value, currently trading at a price-to-earnings ratio of just x5.8 for next year. It is also expected to reverse return to a healthy profit by 2023. The company also has exposure to the budget airline market through Vueling and Aer Lingus and while it abandoned its move to take over Air Europa late last year it shows it has ambitions to further expand in this area. And it has plenty of capital available to it to make major acquisitions that could fuel growth when the sector recovers.

IAG’s cheap valuation does reflect the risks it faces over the next couple of years but for investors willing to take on a little more risk the potential upside looks attractive.

A dollar-denominated airline stock play

On the other side of the Atlantic, American airlines also suffered during the pandemic but are now recovering strongly. For British investors, dollar-denominated U.S. stocks also offer the attraction of potential gains in pound sterling terms as a result of a strengthening U.S. dollar. The Fed’s more aggressive raising of interest rates compared to the ECB or Bank of England is boosting the dollar against the pound and euro and it is also benefitting from its safe haven status during a period of economic stress.

One U.S. airline that looks particularly interesting right new is Southwest Airlines, the world’s largest low cost carrier. The USA’s domestic travel market has recovered so strongly this year that Southwest expects its Q2 revenues to be 10% higher than those over the same three months in 2019. It’s already profitable again and earnings per share are forecast to come in at $2.67 for 2022 and then leap to $3.84 in 2023. It’s a much more profitable operator than easyHet.

It also, unusually for an American airline, hedges a lot of its oil. That’s expected to see it achieve much better operating margins this year, predicted to reach 15.5% in Q2,  than other airlines being hit by much higher fuel costs. The company isn’t immune to the risk of the impact the inflationary squeeze could have on leisure travel but is seen as one of the most resilient airlines in the sector. It could be a better bet than either of its two London-listed peers.

The post Airline stocks have been beset by external problems but could now be a good time to invest in a sector many think is in crisis? first appeared on Trading and Investment News.

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Falling VIX Spells BIG Trouble For The Bears

If there’s one thing that a bear market – secular or cyclical – feeds on, it’s fear. The further the drop, the bigger the spike we see in the Volatility…



If there's one thing that a bear market - secular or cyclical - feeds on, it's fear. The further the drop, the bigger the spike we see in the Volatility Index ($VIX). From the website, the VIX "measures the level of expected volatility of the S&P 500 Index over the next 30 days that is implied in the bid/ask quotations of S&P options. Thus, the VIX is a forward-looking measure..." So let's be clear about this. The VIX does NOT measure what's happening now or what just happened last week. Instead, it looks forward to determine expected volatility. High volatility is generally associated with falling equity prices and low volatility typically accompanies rising equity prices.

As fear dissipates, expected volatility drops, and bear markets end. That's the historical formula. Let's start off by looking back to the financial crisis in 2008 and how the spiking VIX unfolded:

The VIX topped in October 2008 and though the S&P 500 hit two lower price points, the bear market ran out of sellers as fear came tumbling down in late 2008 and into the first quarter of 2009.

During the market turbulence in 2014-2016, we saw a somewhat similar pattern:

Q4 2018 was a very short cyclical bear market (less than 3 months), as was the pandemic-led selling in March 2020 (4 weeks), so there really wasn't much time to evaluate the VIX at various low points, but currently we're seeing a similar pattern in the cyclical bear market of 2022:

But the action on the VIX was really strange this week. The S&P 500 saw selling pressure once again, yet the VIX finished very close to a 3-week low. Check out this 1-month 30-minute chart:

From mid-day on Thursday through the early morning Friday, the S&P 500 fell from 3820 to 3750 and the VIX was dropping right along with it. That's extremely unusual behavior. The VIX is looking ahead and it's pricing in less volatility. That suggests that we're being given a signal of a rally ahead. That's the reason the VIX goes down. Less volatility means higher equity prices.

We're heading into a fresh quarterly earnings season and I'll be featuring one company that I believe is poised to make a big run into its quarterly earnings report later this month. To read about it in our next newsletter article, simply CLICK HERE and sign up for our FREE EB Digest newsletter. It only takes a name and email address. There is no credit card required and you may unsubscribe at any time.

Happy trading!


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