Like many growth stocks, 2022 was a brutal year for most cannabis stocks. The Advisor Shares Pure Cannabis ETF and TFMG Alternative Harvest ETF are down more than 72% and 62%, respectively, at the close of 2022. The main reason cited for plummeting share prices for cannabis stocks is a glut of low-priced marijuana that makes it hard for companies to make much of a profit.

In short, there's too much competition, both from legal cannabis companies and illegal cannabis providers. On top of that, last week, the SAFE Banking Act was left out of a $1.7 trillion government funding package. That means it will continue to be difficult for cannabis retailers to get funding from banks. At the federal level, marijuana is still considered an illegal Schedule 1 drug, so most banks stay away from delivering standard banking services to cannabis companies.

That's a big problem for cannabis retailers, especially the smaller ones that are looking to grow. However, it provides a cottage industry for Innovative Industrial Properties (NYSE: IIPR) and NewLake Capital Partners (OTC: NLCP), two cannabis real estate investment trusts (REITs). The companies are two of the few sources of capital for cannabis companies because they buy cannabis retailers' facilities and then lease them back with triple-net leases that put most of the costs on the tenants.

Continue reading

Source Fool.com