Innovative Industrial Properties (IIPR) is the IBD 50 Stocks To Watch pick for Thursday as it offers a new buy point while aiming to go higher after a 531% run from its 2020 nadir.
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Innovative is a real estate investment trust focused on the marijuana industry. Instead of growing the crop itself, the firm serves growers by providing them with land. At the end of Q2, the firm had 73 properties across 18 states, representing approximately 6.8 million square feet.
It follows a business model which frees real estate-focused companies from the usual federal corporate taxes, so long as they return their free operating cash flow to investors in the form of a dividend.
This means the stock is a double threat, offering both price performance and yield. Innovative’s annualized yield is currently 2.4%. This is nearly double the S&P 500 average yield of 1.3%.
Stocks To Watch: IIPR Analysis
IIPR stock is offering up a buying opportunity as it tries to rebound off its 10-week moving average. The entry point here is near 232.93, and it is actionable as high as 256.22.
In addition, the relative strength line is making progress once again. This comes after it took a dip through early September. It it can maintain its momentum, it could make a new high.
Among top stocks to watch within the cannabis trade, IIPR owns a perfect IBD Composite Rating of 99. Stock market performance is an important factor, with its Relative Strength Rating a healthy 92. The stock is up 35% so far in 2021, and has surged more than 500% above its 2020 lows.
Earnings per share are even better, though; EPS has swelled an average of 26% over the past three quarters. This is just above CAN SLIM requirements. Earnings have accelerated for the past two quarters, which is encouraging.
Big money is buying into IIPR — another key consideration for the CAN SLIM investor for stocks to watch. It boasts an Accumulation/Distribution Rating of B-, which represents moderate buying among institutions.
Noteworthy holders include the American Century Small Cap Growth Fund (ANOIX) and the MFS Blended Research Small Cap Equity Fund (BRSQX). These are both rated as being among the best performing funds by IBD research.
In total, 51% of its shares are currently held by funds, according to MarketSmith data.
CEO Sees Bright Future Ahead
IIPR CEO Paul Smithers touted the strength of the legal marijuana market during the firm’s Q2 earnings call, and he sees things only getting better going forward.
“Notwithstanding the unprecedented challenges experienced in the country from the pandemic, the remarkable resiliency and growth that the cannabis industry exhibited in 2020 has continued in 2021,” he said. “In fact, with new markets coming online and existing markets trending strongly upward, annual legal cannabis sales in the U.S. are projected to surpass $30 billion by 2022.”
He also said the firm is continuing to grow its business, making five acquisitions in four states in the second quarter alone.
lease follow Michael Larkin on Twitter at @IBD_MLarkin for more on growth stocks and analysis.
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