Cramer On Cannabis: Innovative Industrial Won't 'Let You Sleep Soundly,' Constellation A Safer Bet

Friday was a difficult day for cannabis companies after Canopy Growth Corp CGC's earnings report showed a quarter-over-quarter decline in Canadian recreational usage, CNBC's Jim Cramer said during his daily "Mad Money" show.

What Happened

Canopy's quarter-over-quarter decline in recreational usage is "not supposed to happen," Cramer said.

The "very suboptimal" report devastated the industry and may prompt investors to reassess their exposure to the group, the CNBC host said.

One option that may look appealing is Innovative Industrial Properties Inc IIPR, the only public REIT company that focuses solely on the cannabis sector, with an emphasis on medical, he said. 

Yet Innovative's stock surge from $20 in late 2016 to around $120 makes the stock "too hot" to buy, Cramer said.

"A medical marijuana real estate investment trust with $1 billion market cap is not — I repeat not — the kind of stock that will let you sleep soundly at night." 

A safer play on cannabis stocks is Constellation Brands, Inc STZ, the alcohol maker that invested $4 billion in Canopy Growth, Cramer said.

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Why It's Important

Constellation is a safer play on cannabis, in Cramer's view, as its core products include well-known beer brands.

This doesn't make it a purely safe investment as he said it's likely the concept no longer exists within the cannabis space.

What's Next

Investors will get a glimpse at Constellation's performance when the company reports first-quarter results before Friday's market open.

Constellation shares were down 0.59% at the time of publication Monday; Innovative Industrial Properties shares were up 4.56%; and Canopy Growth shares were down 2.76%. 

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