Not SaaS but a small REIT called Innovative Industrial Properties (IIPR).
I was looking around last year for a cannabis stock which wouldn’t burn me if the bubble burst and came across this article from TMF so took a small starter position back in mid October when it was trading at around $43.
Since then I added at $52 and again at $55 bringing it to a 4% position. Currently trades at $66.
Buys real estate for growing medical marijuana and then leases it back to growers for recurring revenues.
YoIC of 15.7%
Dividend yield of around 2.5%
Forward P/E of around 33 (yikes!)
There are definitely risks:
My question is: Is this a bubble stock or a genuine growth stock?
Not SaaS but a small REIT called Innovative Industrial Properties (IIPR).
Thansk for posting your research, but I believe REIT’s would be considered off topic here. They may be growing while the whole cannabis mania continues, but ultimately REIT’s would be dividend stock talk. Perhaps you can try posting to one of the REIT boards for further discussion?
I thought that it may classify as a growth stock since in Q3 revenue was up by 152% year over year, EPS up by 133% and adjusted funds from operations (AFFO) per share (like earnings for REITs) was up 81%.
Can you (or anyone else) recommend a REIT board to discuss it? Since I’m not a member of any and this is the first REIT I’ve ever invested in then I’m starting from scratch here.
Try this board:
If you click on “Boards Home” above, and then “Investment Analysis Clubs”,
I found this one - Dividend Growth Investing - which should qualify, because the company by law has to pay out 90% of their profits as a dividend.
I’m sure there must be other boards for the dividend payers as well.
Thanks to both.
Not interested in Dividend investing or REITs per se but will give them a try.
Just a shame that a company growing at 88% YoY can’t be discussed here.
Well, I’m glad you mentioned that stock. I bought and sold it maybe like a fool now that you show what it’s making. Ah well, can’t win them all. Sure looks like a growth stock to me.
No idea what REIT means
My apologies for contributing to an OT thread but I think something must be said.
The last bubble was crypto and before that was the .com bubble. Companies involved had PS of 60, 80, 100.
Many of the bigger names in pot like canopy and acre are pushing P/S of 200 or 60 in this REITs case. Ok so 160% growth on $13M TTM revenue. A company wins the ticker POT in a lottery and goes up 50% dispite having nothing to do with marijuana.
Compare that to so many discussions on SaaS valuations.
People ask if SaaS is in a bubble. Not even close. Pot stocks are in a bubble. That’s what it looks like.
Just a shame that a company growing at 88% YoY can’t be discussed here
Hi Poorbloke, as Matt said, this is not the place for Reits, but on the side panel there is a link to Places for off topic posts. I went there and found the following:
REAL ESTATE BOARDS:
Board name: Owning Rental Property
This board focuses on investing in… rental real estate. Expect to stay on topic.
Board name: Real Estate Investment Trusts – REITs (aka REIT board)
This board focuses on ‘trusts/mutual funds’ that are comprised of real estate stocks. Expect to stay on topic.
I took a small position in IIPR 25 months ago as a speculative shot. It’s up apx 250%. I’ve mentioned it a few times on this board but I haven’t promoted it. I never provided numbers or analysis, as there wasn’t much history to present. They did not have much of a history prior to IPO as many of our stocks do. Maybe it’s time to dig in and start looking at it as a real investment rather than just a speculation.
I don’t agree.
IIPR is growing like a weed (pardon the pun). This is a board about high growth stocks not about certain verticals. There may be other reasons that it might be considered OT, but the simple fact that it’s a REIT wouldn’t be one. Not all that long ago many of us closely following LGIH, another real estate business.
IIPR comes with a bunch of risks that are atypical, not just of the stocks we generally follow, but atypical for most any business. The most serious of which is that marijuana is still on the federal books as a class 1 illicit drug. There is an uneasy truce between the feds and the states that have taken steps to locally legalize pot. Aside from criminal exposure, the biggest risk is that no bank will lend to them (as they risk losing FDIC coverage). Chuck Schumer has introduced (or maybe just proposed?) legislation to decriminalize pot. This would open up a lot more financing options, but keep the legalization question as a state issue (Chuck is looking out for the banks that want to get in on this business).
This is the same reason that IIPR has constrained their business to medical marijuana growers as they feel it’s lower risk than recreational marijuana growers. One would expect this strategy to change if pot were decriminalized (or legalized) at the federal level.
As for “bubble” territory, I would agree that growers and sellers are bubbly (I also hold a tiny position in Canopy). But IIPR supplies infrastructure to the industry, they are not directly tied to the retail business. This is one of the reasons I bought a small position (which I recently added to).
Further, we’ve recently had a discussion about valuation. Does high valuation equate to bubble? For sure in some cases (bitcoin), but this company, I’m not so sure. At present they have no problem finding tenants for every property they field. In fact, one of their strategies is to buy existing grow facilities, upgrade the property (or give an allowance for upgrades) and lease it back to the seller. They are resource constrained by access to cash and the efforts involved with bringing a property online, not by a dearth of customer.
Thirty-three states have legalized medical marijuana, ten states have legalized recreational marijuana. This industry is providing big tax dollars to state coffers and providing lots of jobs. You may or may not agree with this trend, but there’s no turning back.
I anticipate one of two outcomes should marijuana become legalized. Either IIPR will show explosive growth for a while or they will be acquired but a large, existing REIT for a large premium. I can’t foresee any outcome that would drive them out of business, but maybe my vision is impaired. Always a possibility.
IIPR is a high growth investment that happens to be a REIT. The fact that they pay a dividend is neither here no there. Other stocks discussed on this board also pay dividends. The risks involved with IIPR are unique and may discourage investment (this is the primary reason I’ve kept my position very small despite impressive growth). But frankly, I’d like to see more discussion of this particular company. I’m not advocating throwing the board open to the marijuana industry in general as a lot of the industry is very frothy and uncertain. However, I think IIPR deserves more attention as a high growth company.
I think I agree with Brittlerock. Saul has invested in and discussed MLPs on this board before: https://discussion.fool.com/a-new-position-32572749.aspx
If a company is growing, why would its classification or sector automatically disqualify it from discussion? That’s certainly not an endorsement of IIPR, I have never looked at the company before, but I do object a little to companies being automatically disqualified based on being a REIT or MLP or whatever…
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There are two reasons that IIPR is off-topic for our board.
- It’s a REIT. That’s a Real Estate Investment Trust, not a stock of an individual company, and if we accept that as okay, then we will start getting other REIT’s. And we won’t be able to keep them off after accepting IIRP, and it will change the whole tenor of the board.
- It’s primarily a cannabis play, and after accepting one, it will be hard to bar a huge motley crew of cannabis speculations.
On the other hand, there’s nothing wrong with discussing it elsewhere. That’s why I gave the link to the REIT board a little while ago.
But you can start your own board with no trouble to discuss IIRP or cannabis stocks. It’s as easy as pie. On the top line of every board, there are topics in blue, including “Start a New Board”. If you really want to discuss IIPR just start your own board, and post a link to it here, and you are off.
BUT IIRP IS OFF-TOPIC FOR OUR BOARD. THAT’S JUST THE WAY IT IS.
Thanks for your cooperation,
I’m sorry, Saul, but I thought when you said:
“That is incorrect. ANY fast growing growth stock is welcome to be discussed on our board. That’s what the board is for!” then I was free to introduce a fast growing stock which we may all profit from.
If you look at the actual financial returns of IIPR (not just the stock price) then it is a growth company.
It seems like there are three terms which have put people off discussing this particular growth stock:
Each of us has our own negative emotional triggers and not for one moment am I suggesting that we should discuss stocks like American Tower (REIT), Canopy (Cannabis/Marijuana) or purely dividend stocks here.
If you look at the financial numbers rather than the stock price, then this is a growth stock whichever way you cut it, with recurring revenues and founder owned.
Maybe I should have just posted the financials without naming the stock and that post would have received a better response.
I’m disappointed, but it’s your board so your rules.
No offence intended.
A REIT has to pay out 90% of its taxable profit to shareholders. That limits its growth. The red flags to me for IIPR are its rapid share price increase so far, and its low dividend compared to the average REIT. (The broad-based Vanguard real estate index fund has a dividend about twice that, and many sound REITs that grow in share price have dividends over 5%.)
REIT growth is also limited by the real estate market, which is a lot stodgier and cyclical than the software subscription market.
It seems that the driver for IIPR’s share price growth is its connection to the weed industry rather than its strength among REITs. That makes its long-term prospects riskier and much more volatile than a solid REIT like DLR or FRT.
The main number that analysts look at with REITs isn’t P/E, but the price-to-AFFO ratio. (AFFO is adjusted funds from operations, which is highly related to rental income.)