While a search for the right cannabis stock is just dismay these days, there is a company that holds well during the hard times and will capitalize well once the overall sector explodes again. Innovative Industrial Properties (IIPR) is showing both fundamental and technical strength.
IIPR is a real estate company focused on acquisition, ownership, and management of properties used for cultivation and production of legal cannabis. Thus, it is not directly engaged in cannabis business like other well-known firms whose stock charts are finding their bottoms. When the cannabis producer goes into administration, the property is simply leased to another one.
When there was a gold rush in California, not gold-diggers were the most profitable, it was Levi Strauss who was supplying them with appropriate clothes. This time – in the early age of cannabis business, it may be Innovative Industrial Properties who will profit well in both up and down periods.
Fundamental Analyses
Revenue and Earnings have been constantly growing, which is the first good sign of successful growth. A debt/equity ratio is 0.31, EPS next year is 156%, the gross margin is 96% and the operating margin is 50%. In addition, the dividend yield is 4.32%. The fundamentals are in favor of future growth, while also providing dividends, which is rather impossible in most of the cannabis stocks.
Technical Analyses
Innovative Industrial Properties stock price reached 140 last year – it was actually rising while the overall cannabis industry was already in trendy decline. Once it had reached its top, the buyers moved away from the stock under the worries coming from marijuana producers. In the end of October the price hit its bottom at 65 and started to consolidate forming a triangle pattern (see the orange lines).
Between November 2019 and February 2020 the IIPR stock formed a symmetrical triangle and then completed rather ascending triangle breaking out at 95. The break-out is also confirmed by huge volume – see the red triangle. The price continued in further increase forming a short-term consolidation pattern Flag (see a blue pole with the flag), that was recently also completed and price seems heading up again. One would expect the stock to slide its stairway to heaven while sliding up the 20 EMA.
The RSI and MACD are well supporting the price action, while Slow Stochastic is constantly being pushed in upper territories. This means that buyers are again interested to go long.
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The almost transparent line behind the price is XLRE – the Real Estate Index. Here you can see that Innovative Industrial Properties stock correlates rather with real estate than with cannabis. Furthermore, you can also see that Real Estate sector just reached its top. It has been actually one of the best performers together with Utilities and Technology. Hence, another might expect that IIRS stock price is now going to chase its peers.
If you are a cannabis investor, this stock should help to diversify your currently dismayed portfolio, while also provide decent dividends.
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