This is the key to investing in the cannabis industry without betting the farm on the success or failure of one company…
Pick-and-shovel plays give investors a way to profit from the cannabis industry, no matter the regulatory environment.
These pick-and-shovel companies do not directly run afoul of federal law in the United States, where the ability to sell and transport cannabis can be tricky due to its designation as a Schedule I drug.
That’s one of the many reasons these types of companies present such a lucrative investment opportunity.
So whether you’re new to cannabis investing or a seasoned pro, you need to know how to get in on this massive wave of wealth (and minimize risk) with pick-and-shovel plays.
What Are Pick-and-Shovel Companies?
The phrase “pick and shovel” can be traced back to the California Gold Rush.
While some of the 49ers became extremely rich, others went broke. But there was one group of people who became wealthy without ever doing a lick of back-breaking labor – the early entrepreneurs who sold picks and shovels to the miners.
These pick-and-shovel (also known as ancillary) companies exist in just about every industry.
When it comes to cannabis, a pick-and-shovel business is a one that provides cannabis companies with essential products and services such as grow lights, security, or insurance without ever “touching the flower.”
Pick-and-shovel companies are not pure-play cannabis stocks, but they give you a “backdoor” way to invest in this unstoppable cannabis market.
Why Pick-and-Shovel Plays?
Investing in these pick-and-shovel companies is profitable for new and experienced investors alike…
- You don’t have the pressure of picking cannabis companies you think will succeed. You just have to pick companies that supply them.
- You can put your money into companies listed on the major American stock exchanges – such as the New York Stock Exchange (NYSE) or the Nasdaq, whereas many cannabis companies are not listed on these exchanges.
- You can invest in companies that do not have the banking, tax, and regulatory difficulties faced by cannabis companies.
- And you’re still helping to bolster the cannabis market by contributing to its overall market value.
There are dozens upon dozens of these types of companies operating in the U.S. Let’s take a look at three prime examples.
3 Examples of Pick-and-Shovel Cannabis Companies
1. A pick-and-shovel company that you’ll surely recognize is The Scotts Miracle-Gro Company (NYSE: SMG). Best known as a fertilizer and seed company, it’s been investing heavily in the lighting industry for cannabis growhouses.
This lighting system, distributed by Scotts Miracle-Gro’s Hawthorne division, is responsible for nearly a third of the company’s total sales.
2. Then there’s Shopify Inc. (NYSE: SHOP).
While the majority of its business is in other markets, Shopify has been helping cannabis companies build payment solutions that stay compliant with local and national regulations. By serving the cannabis industry, it’s able to grab a share of the booming cannabis market.
In fact, Shopify’s involvement in the cannabis industry is one reason its stock has delivered peak gains of 938%!
3. Innovative Industrial Properties Inc. (NYSE: IIPR), which is often referred to as the “landlord of cannabis,” is one of the best examples of a pick-and-shovel play.
This is a company that has dared to tread where many other property owners fear and as a result has made itself a very profitable niche.
IIPR stands out from other cannabis stocks in three ways – it’s profitable, it’s paying a dividend, and it’s available on a major U.S. stock exchange.
It’s essentially a special type of real estate firm called a real estate investment trust (REIT) that buys buildings from cannabis companies and leases the properties back to them.
What Makes REITs a Winning Pick-and-Shovel Play
REITs like IIPR are a win-win for both organizations. Cannabis companies are able to free up precious capital to grow their business, and IIPR is able to charge higher rents than REITs in other industries.
And here’s where IIPR really stands out from your typical REIT.
Investors like REITs because they are considered “safe” investments. They have leases and receive rent on a set schedule. But with that business model, REITs aren’t considered stocks that are going to crush the market like Amazon or Microsoft.
With IIPR, however, you have a company that could crush the market because it serves companies in the red-hot cannabis sector and, on top of that, it also pays shareholders a dividend.
Stock price appreciation?
Now, you can see how profitable an investment in a pick-and-shovel company could be – but which ones will get you the biggest returns is another story entirely.
How to Identify the Best Pick-and-Shovel Plays Out There
Even without full legalization, the global cannabis industry is worth $15 billion.
And with revenues predicted to increase by a whopping 12-fold once cannabis becomes fully legal in the U.S., now is the perfect time to jump in.
But which stocks are rated as today’s best buys?
To help you answer that million-dollar question, we created the”Marijuana Millionaire’s Vault.”
It’s the most comprehensive database of cannabis stocks available anywhere, powered by the incredible team of cannabis industry experts here at the National Institute for Cannabis Investors.
Any time one of the 200-plus cannabis companies in the database releases an earnings report, our expert research team updates the “Vault” to reflect the most up-to-date information.
And with a proprietary rating system, you can know at a glance which cannabis companies will bring you the highest profit potential.
You can even sort the database by sub-sector to find all the best pick-and-shovel companies we have available.
So if you’re looking for a way to maximize profits on your next pick-and-shovel play, you need access to this invaluable tool.
To find out how you can gain full access to the “Vault,” click here.
To your investing success,
2 responses to “The Secret to Maximizing Cannabis Profits With Pick-and-Shovel Plays”
March 19 2020