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It's nice to be No. 1. And both Canopy Growth (NYSE: CGC) and Innovative Industrial Properties (NYSE: IIPR) can lay claim to being at the top in different ways.
Canopy Growth is the largest marijuana producer in terms of market cap. Innovative Industrial Properties is the leading real estate investment trust (REIT) focused on the medical cannabis industry.
But which of these marijuana stocks should be the No. 1 choice for investors? Here's how Canopy Growth and Innovative Industrial Properties stack up against each other.
Image source: Getty Images.
The case for Canopy Growth
Perhaps the strongest argument for buying Canopy Growth is that the company should be able to deliver on part of its name: growth. Canopy's roots are in the Canadian medical marijuana market. Now, though, it's the Canadian recreational marijuana market that presents a huge opportunity for the company.
The problem right now in capitalizing on that opportunity is limited production capacity. Canopy Growth and its peers can't grow enough cannabis to keep up with demand. But that shouldn't be a problem for Canopy too much longer. The company is progressing toward its goal of 5.6 million square feet of production capacity across Canada.
Canopy Growth isn't limited to Canada. The global medical marijuana market continues to expand rapidly. Canopy is a top player in several key markets, notably Germany.
In the past, Canopy couldn't establish operations in the U.S. because marijuana remained illegal at the federal level. But with the recent U.S. legalization of hemp (cannabis with low levels of psychoactive compound THC), Canopy now plans to quickly enter the U.S. market. Cannabis market-research firm Brightfield Group estimates that the U.S. hemp-based cannabidiol market could grow to $22 billion by 2022.
Funding an expansion into the lucrative U.S. market isn't an issue for Canopy Growth. Major alcoholic beverage company Constellation Brands invested $4 billion in 2018 to increase its stake in Canopy to around 38%. Not only does Canopy now have plenty of cash, the company also has a strong partner with expertise in building successful consumer brands.
The case for Innovative Industrial Properties
Innovative Industrial Properties is delivering on part of its name, too. The company's focus on developing properties to lease to U.S. medical cannabis growers has provided an innovative solution for small marijuana businesses to get up and running.
Securing operating capital still can present some challenges for U.S. marijuana growers because federal laws restrict the ability of financial institutions to work with the cannabis industry. Innovative Industrial Properties provides the real estate capital needed.