The market talk surrounding marijuana mutual funds is usually touting how this new market is growing and changing on a constant basis. However, the reality is that there have also been some starts and stalls to the market as it finds its way through the maze of legalities, supply and demand and investment. There was a downward trend in the marijuana mutual funds in the back half of 2019 but that seems to be shifting heading into 2020.
Some funds are coming in flat which is better than a loss and others are actually rising. While Canada has supplied issues and many US states are imposing high taxation rates, there are some stocks have gone from flat returns to those that gained over 10% in 2020. The upswing will continue as more governments allow legal and recreational marijuana. So, which are the trending marijuana mutual funds that need to be watched in 2020? Who are investors and where are they investing?
This stock was up 88% heading into 2020 (OTC:NXTTF). It is based in Toronto, Ontario, Canada and is a leading global online platform for cannabis products, accessories, and education. They provide vapes and operate a medical cannabis patient portal called NamasteMD. The rise in their share price is due to the fact that the company Choklat received a license from Health Canada for processing infused chocolates and drink mixes and Namaste owns a 49% stake in it. It is known in the cannabis marketplace that cannabis derivative products have a much higher profit margin than regular flower, so the new license moved their stock prices up.
Namaste is a year removed from a scandal where the past CEO sold company assets to a third party and did not disclose the sale in security filings. They have worked to gain back their shareholder’s trust over 2019 and this license boosts their comeback in the market
KushCo Holdings made gains heading into 2020 with a January increase of 26%. KushCo Holdings (OTC:KSHB) This company sells packaging, vaporizers, containers for the cannabis market out of Garden Grove, California. While vaporizers sales are down right now, investors are looking at the positive long-term growth potential. The company is looking at between $230-250 million in sales in 2020. While the start of the year is slow financially, their management team is projecting improved numbers through the rest of the year along with increased vape sales. Their positive outlook should keep their stock value growing and on the plus side.
While this solid performing company is not producing marijuana products, it is building its name in the industry with real estate holdings. Innovative Industrial Properties (NYSE:IIPR) which is based out of San Diego, California is up 18% in January 2020. It is a top performer than continues to hold its own in the cannabis markets. It now owns 48 properties in 15 different states. Its average held lease time on the properties is 15.6 years and they are getting an average return on assets of 13.3%. Their funds are solid as they will have completed payback of the $529 million capital investment in under 5 and a half years.
The company sold 3.4 million shares of common stock in early 2020 and raised $250 million in gross proceeds. And while this is not always a good thing for a company, they have previously proven they know how to put capital to work fast and with great effectiveness. The raising of this capital is a good sign that they are still going to be aggressive and go after more assets in a market that is not settled heading into the second quarter of 2020.
This Florida based company provides medicinal brands of marijuana that are designed to give patients the best quality of life possible. Liberty Health Sciences (OTC:LHSIF) came into January 2020 strong and up 18%. It opened its 23rd medical dispensary in Florida to strong support. The Florida market is viable and has good supply and few regulatory problems. Dispensaries are opening and thriving.
Their progress has surprised some market watchers as their sales took a dramatic jump from $3.2 million to $16.1 million in and year giving them $6.9 million in net income. Market gurus note that fair-value adjustment was critical in the size of this profit but even without the adjustment they ended up with about $2 million in operating profit which demonstrates solid progress when other companies are losing ground.
While MediPharm’s is a struggling stock, (OTC:MEDIF) it is one that investors should seriously look at right now. This company that is based out of Barrie, Ontario Canada it offers pharma-quality cannabis-based products. This company is ready to hit the ground running and has been held back by Canadian governmental issues that they had no control over. Health Canada is delayed in their oversight of cultivation putting growers on hold, there are poor dispensary numbers in big provinces such as Ontario and the secondary market of alternative consumption options and derivatives including vapes and edibles has been delayed.
While all this has slowed the company’s growth, they have great potential. They are going to be a big player in the derivatives market and have a plan to bring in the young demographic who love them. Their numbers are down but stable and beginning the upswing so have patience.
If you can only pick one fund, look at Innovative Industrial Properties (NYSE:IIPR). Most stocks are taking a tumble but this one is holding its own. The shares have gone up 23% in 2020 so far. Their numbers in 2019 and early 2020 are solid. They have a good business model and a great team in place to execute their plan. The concept of buying medical cannabis operators’ properties then leasing it back means they can turn a profit while giving the operators capital. They have a steady income over a long period of time. They are smart in their investments and show no signs of slowing. A good investment if you must choose just one.
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