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October Was Tough on Cannabis Stocks: What’s Ahead?

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Cannabis sector in October

The overall cannabis sector in October was broadly negative, and most of the cannabis stocks covered below ended in the negative territory. The Horizons Marijuana Life Sciences ETF (HMMJ) lost almost 24% in October alone, and the ETFMG Alternative Harvest ETF (MJ) also fell ~24%. Year-to-date, HMMJ has lost almost 11.5%, and the MJ ETF has lost almost 10.6%. Let’s review how some of the major cannabis stocks performed in October and on a year-to-date basis.

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Cannabis stocks

In the above chart, we see the overall monthly returns of ten cannabis stocks and two cannabis ETFs. In the first ten months of the year, only May, August, and September were positive overall for the cannabis sector. Tilray (TLRY), which only debuted in July, added significantly to the overall sector returns in August and September. However, other cannabis stocks managed to report overall gains as well.

Canopy Growth (WEED) (CGC) lost 24% in October, Aurora Cannabis (ACB) lost 28%, Tilray lost almost 43%, Cronos (CRON) was down about 34%, and Aphria (APHQF) declined by about 12% in October alone. YTD, Canopy Growth is the only one with a gain of 43%, while the other four stocks were in the negative territory.

Our view

The cannabis sector has remained volatile due to several factors. One of the key factors is all the hype around the industry. With retail investors and day traders looking to profit on volatility, the sector has experienced significant price movements. However, despite the high volatility, the fundamentals of the industry remain strong.

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