How Do Cannabis ETFs Look in November?


Nov. 19 2019, Published 7:36 a.m. ET

So far, November has been tough for the cannabis sector. Most cannabis companies have reported lower-than-expected earnings. Also, MKM Partners expects pricing pressure and higher inventory levels to be near-term challenges for the sector, as reported by MarketWatch. All of these issues could have dragged the cannabis sector down. Let’s look at the performance of three prominent ETFs in the cannabis sector.

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ETFMG Alternative Harvest ETF

Founded on December 3, 2015, the ETFMG Alternative Harvest ETF (MJ) was the first US ETF that focused on marijuana stocks. The fund, which has $672.36 million of AUM (assets under management), has invested 8.2% of its holdings in Tilray (TLRY), 6.9% in Cronos Group (CRON), 6.6% in Canopy Growth (CGC) (WEED), and 5.9% in Aurora Cannabis (ACB). The significant fall in these companies’ stock prices appears to have dragged the ETF down. In November, MJ has lost 17.1% of its stock value as of Monday. Also, the ETF was trading at a discount of 59.1% from its 52-week high of $39.25 and close to its 52-week low of $16.00.

Horizons Marijuana Life Sciences Index ETF

The Horizons Marijuana Life Sciences Index ETF (HMMJ) was founded on April 4, 2017. As of November 15, the ETF has AUM of 429.8 million Canadian dollars. HMMJ has invested 9.4% of its holdings in Cronos Group. Also, the ETF has invested 9.3% in Canopy Growth, 8.4% in Tilray, and 8.2% in Aurora Cannabis. In November, HMMJ has lost 19.4% of its stock value as of Monday. The same day, the ETF hit its 52-week low of 8.42 Canadian dollars before closing at 8.43 Canadian dollars. Also, the ETF’s stock was at a discount of 64.7% from its 52-week high of 23.87 Canadian dollars.

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Cambria Cannabis ETF

The Cambria Cannabis ETF (TOKE) was founded on July 25 this year. The ETF focuses on investing in small and mid-cap marijuana companies. The ETF has net assets of $8.9 million. TOKE has invested 6.2% of its holdings in Medipharm Labs, 5.2% in Aphria (APHA), 4.0% in Aurora Cannabis, and 3.4% in Canopy Growth. In November, the ETF has lost 13.2% of its stock value as of Monday. TOKE has more than 12% of its holdings in cash, which might have caused it to fall less compared to other ETFs.

Cannabis sector has underperformed this year

So far, the cannabis sector has underperformed the broader equity market this year. MJ and HMMJ have fallen 35.6% and 41.3%, respectively, YTD. However, the S&P 500 Index has increased 24.5% during the same period. The fall in marijuana sales, thriving black market, and vaping related deaths have dragged the cannabis sector down.

We expect the weakness in the cannabis sector to continue for some time. Despite the decline in cannabis prices, it’s still significantly higher than black market prices. So, the significant price difference might impact customers moving from the black market to legal business. However, we expect that the introduction of cannabis 2.0 products and marijuana legalization in the US could boost the sector. The companies plan to introduce their cannabis-derived products by the end of this year. The products allow companies to differentiate their products and command higher prices, which could drive their margins.

Read Cowen Boosts Estimate for US Cannabis Market in 2030 and Top 5 Reasons Why Cannabis Earnings Disappointed to learn more. For more on cannabis-related news, please visit 420 Investor Daily


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