IIPR Bottoming for next leg up
Lets talk pot stocks.
To be honest, I stumbled on this one when looking for an over-run pot stock to short. Then I read what they actually do, and it kind of blew my mind (just a little).
Because pot is not federally legal, medical dispensaries can't work with banks (for the most part). IIPR is technically a REIT, but their real value comes from sale-leasebacks which essentially act as a loan to these medical marijuana companies. For example, IIPR (as I understand it) purchases medical marijuana facilities from dispensaries and leases these facilities back to the dispensaries at rates upwards of 15%. The dispensaries must still maintain the locations, IIPR simply collects the checks.
As of last month, IIPR had about 160 million in assets and owned 5-9 properties (4 are being worked out currently). A solid start for a company which just began in 2016. Last week, IIPR filed for a prospectus for 300 million in securities offering, which would allow them to TRIPPLE in size.
To sum up, this is a company that A) has a real economic value for these medical dispensaries due to current legal status of working with banks, B) has way less debt then other medical marijuana plays because it OWNS the properties and C) Easily identifiable cash flows which make forecasting much easier then other pot companies, as well as what I see as a self sustaining cash printing machine until the overall market hits a downturn or banks are allowed to work with marijuana companies (which would then only affect IIPRs growth prospects).
Technicals:
- The 50 SMA/ EMA seems to be providing some support for the stock, as the 2-hour MACD has flipped to the bullish side (while the daily is simply flat).
- The recent breakout to new highs (after a cup and shoulder) indicates further upwards momentum
- Huge volume on friday (on no news!)
- Stochastics on RSI have flipped (while RSI slightly turning upwards)
While this may not quite have found its short term bottom, I believe the likelihood is that it HAS - or at worst will early this next week. I am buying in quarters of a position, and have half a position in at this time. On any weakness I will buy more to fill out the position. The .5 retracement will be my stop as it converges with the bottom of the ichimoku cloud and the 100 day smooth moving average. I will take profits at the 1.236.
Total Reward/Risk : 2.5/1 or 24%/9.5%
For a more short term trade, I would use the .618 ichimoku as the stop loss and the peak for profit taking (looks like more of a 3/1 or 3.5/1)
Disclaimer:
This is meant for educational purposes only and should not be taken for investment advice. I am not a professional investment advisor.
To be honest, I stumbled on this one when looking for an over-run pot stock to short. Then I read what they actually do, and it kind of blew my mind (just a little).
Because pot is not federally legal, medical dispensaries can't work with banks (for the most part). IIPR is technically a REIT, but their real value comes from sale-leasebacks which essentially act as a loan to these medical marijuana companies. For example, IIPR (as I understand it) purchases medical marijuana facilities from dispensaries and leases these facilities back to the dispensaries at rates upwards of 15%. The dispensaries must still maintain the locations, IIPR simply collects the checks.
As of last month, IIPR had about 160 million in assets and owned 5-9 properties (4 are being worked out currently). A solid start for a company which just began in 2016. Last week, IIPR filed for a prospectus for 300 million in securities offering, which would allow them to TRIPPLE in size.
To sum up, this is a company that A) has a real economic value for these medical dispensaries due to current legal status of working with banks, B) has way less debt then other medical marijuana plays because it OWNS the properties and C) Easily identifiable cash flows which make forecasting much easier then other pot companies, as well as what I see as a self sustaining cash printing machine until the overall market hits a downturn or banks are allowed to work with marijuana companies (which would then only affect IIPRs growth prospects).
Technicals:
- The 50 SMA/ EMA seems to be providing some support for the stock, as the 2-hour MACD has flipped to the bullish side (while the daily is simply flat).
- The recent breakout to new highs (after a cup and shoulder) indicates further upwards momentum
- Huge volume on friday (on no news!)
- Stochastics on RSI have flipped (while RSI slightly turning upwards)
While this may not quite have found its short term bottom, I believe the likelihood is that it HAS - or at worst will early this next week. I am buying in quarters of a position, and have half a position in at this time. On any weakness I will buy more to fill out the position. The .5 retracement will be my stop as it converges with the bottom of the ichimoku cloud and the 100 day smooth moving average. I will take profits at the 1.236.
Total Reward/Risk : 2.5/1 or 24%/9.5%
For a more short term trade, I would use the .618 ichimoku as the stop loss and the peak for profit taking (looks like more of a 3/1 or 3.5/1)
Disclaimer:
This is meant for educational purposes only and should not be taken for investment advice. I am not a professional investment advisor.
Disclaimer
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