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The cannabis industry might be a great place to look for excellent stocks.
While some are performing well and boast plenty of opportunities ahead, others are facing too many headwinds to be worth investing in right now.
That’s important, because cannabis companies have a hard time accessing funding and various other banking services due to marijuana being classified as a Schedule I substance under the Controlled Substances Act.
Innovative Industrial Properties leases real estate assets to some of the largest multistate operators in the U.S., including Trulieve Cannabis and Cresco Labs.
Medical uses of cannabis are legal in 37 states and the District of Columbia, which gives Innovative Industrial Properties some room to expand its operations elsewhere.
One major worry with this company is that if cannabis is decriminalized at the federal level, that would possibly allow pot growers to do business with banks more freely and make Innovative Industrial Properties obsolete.
However, this would likely also lead to significantly more competition in the cannabis industry, which would mean more potential business partners for Innovative Industrial Properties.
Goodwill is an intangible asset on a company’s balance sheet when it acquires another business; it represents the premium over the fair value of the acquiree’s physical assets.
In fairness, Aurora Cannabis has somewhat been dealing with the first problem, but not necessarily in a way that’d make investors happy.
The important thing to take away, though, is that the company’s management team hasn’t had the best capital allocation strategy in the world, to say the least.