The legalization of medical-grade cannabis has spread to 47 countries out of 196 worldwide. Only two have legalized recreational (adult) use, but the trends have changed, making legalization a hot topic with governments around the world. In the U.S., 15 of 50 states have now fully legalized recreational use, and 38 states have legalized medicinal use.

Why would you invest?

It's a growing industry. The global medicinal cannabis market growing at a 29% compound annual growth rate (CAGR), worth $8.9 billion in 2020, and it's expected to grow to $49 billion by 2028. 

What do the companies do?

Tilray (NASDAQ: TLRY) is a producer and distributor of medical cannabis products globally. It has global distribution for North America, Latin America, Europe, as well as Australia, and New Zealand.

Innovative Industrial Properties (NASDAQ: IIPR), or IIR, is also involved in the medical marijuana sector too, but as a real estate investment trust (REIT). REITs are alternative investments to get exposure to private and commercial property markets without investing in the property directly themselves. It is managed by the REIT company, and it issues dividends to its investors in return.

Okay, so how's business?

Tilray
It has now acquired rival Aphria, making it the largest cannabis company by geographic presence. Other strategic moves in 2021 include entering Europe, with its Portuguese operations giving it distribution to Spain and the UK along with tariff-free access to all of the EU. A second facility gives access to 13,000 pharmacies in Germany.

Tilray is already a market leader, but it plans to extend its dominance in the Canadian market from 16% to 30% by 2023 by lowering cultivation, processing, and manufacturing costs. Other segments for Tilray are independent craft brewing and hemp food manufacturing, with partners like Amazon, Kroger and Costco. 

IIP
Even with temporary rent deferrals, IIP grew revenue by 101% year-over-year. Shareholder dilution is a big factor here as well with an increase of more than 40% in shares outstanding. IIP continues to execute on its growth strategy acquiring more and more property in the U.S. and Canada. It is also the oldest and best know cannabis REIT among investors. Another bright point for investors; IIP currently only operates in 18 out of 38 possible states, so there is still plenty of room to grow in the U.S. alone. 

So, which is the better investment?

Well, both are market leaders; Tilray in product and distribution, and IIR in real estate. However, Tilray faces tougher competition and will need to innovate continuously as it grows. IIR, on the other hand, has a foothold in the market, and many of its competitors are smaller players. Tilray is yet to reach profitability, and IIR has been generating income for shareholders for several years, offering a 2.5% dividend along with an 1150% appreciation in share price since 2016. 

Pretty good. 

Since it has already achieved a profitable stream of income de-risking the business, it poses as a "safer" opportunity in the space. Tilray is definitely the riskier option, but it could produce outsized returns if sentiment in legalizing cannabis changes county by country. So it all depends on your risk tolerance, but IIR looks like the better pick for now. 
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