Marijuana stocks are poised to experience huge growth over the next 5-7 years. New Frontier Data estimates that the United States and Canada alone will generate approximately $ 172 billion in retail sales over the next 6 years.
As more states in the US embrace the legalization of marijuana, both medical and recreational, and cannabis is online in more countries around the world, why not expose yourself to one of the most popular industries. more in vogue from 21st century?
Risks associated with the selection of individual cannabis stocks
If you decide to invest in the marijuana industry, there are plenty of opportunities. Dozens of cannabis companies in the United States have gone public. Most are listed in Canada, but still have over-the-counter (OTC) stocks listed on the US markets.
A number of large Canadian growers, such as Aurora Cannabis Inc., Canopy Growth Corp. and Tilray Inc. have listed their shares on major US stock markets.
Inc., Canopy Growth Corp. and Tilray Inc. have listed their shares on major US stock markets.
Investors can also gain exposure to the marijuana industry without actually investing in companies that work directly with cannabis, THC, or CBD. These are ancillary service providers, essential companies that facilitate the activity of the entire sector.
The recent legalization of hemp and CBD in the United States is also likely to present major opportunities. NFD predicts that the hemp-derived CBD market will reach $ 1.3 billion by 2022, up from $ 390 million in 2018. Hemp is federally legal, so Hemp and CBD-focused companies will be able to list on NYSE and NASDAQ.
You will also find that there are risks involved in investing in cannabis stocks. On the one hand, many small businesses are either overrated or simply pump and dump systems. Larger, established businesses also come with their own risks.
So how do you cover your risk, especially if you are not an expert in cannabis or don’t have the time to research every stock? Think about ETFs.
Why invest in ETFs?
Exchange-traded funds, or ETFs, have become a popular choice among passive investors amid stock market records over the past two years. ETFs offer the convenience of stocks because they can be purchased through a regular brokerage and are very liquid, allowing them to be traded throughout the day.
ETFs also offer diversification and cover a variety of market indices as well as sectors and geographies. These features, along with relatively low management fees, make ETFs attractive. With the marijuana industry still nascent, ETFs offer well-diversified and less risky exposure to the industry than individual stock selection.
Best ETFs on Marijuana
The downside to the emerging nature of the cannabis industry, as well as its federal illegality in the United States, is that there are only a handful of marijuana ETFs available.
There are only a few ETFs available for US investors, 2 of which are based in Canada and are traded in the US on the over-the-counter market. Let’s take a closer look at each.
ETFMG Alternative Crop ETF (NYSEARCA: MJ)
|ETFMG Alternative Crop ETFs||$ 13.30||Buy stocks|
The ETFMG Alternative Harvest ETF is the largest ETF of the 3, with over $ 1.0 billion in assets. The ETF tracks the performance of the Prime Alternative Harvest index.
The fund portfolio includes 37 positions, including exposure to the US dollar and the British pound sterling. It is quite diversified, as the top 10 stocks amass 58% of its assets. It includes the biggest names in cannabis, such as Cronos Group Inc., which is its most important position, as well as Aurora Cannabis Inc., Canopy Growth Corp. and CannTrust Holdings Inc.
Of the 37 positions in the ETFMG Alternative Harvest ETF portfolio, only 11 are pure marijuana stocks. Other positions include pharmaceutical companies that develop or sell cannabis-based drugs, such as GW Pharmaceuticals PLC and Cara Therapeutics Inc.
The ETF also invests in various tobacco companies including Schweitzer-Mauduit International Inc., Vector Group Ltd., Philip Morris International Inc. and British American Tobacco PLC (NYSE: BTI).
Horizons Marijuana Life Sciences Index ETF (OTC: HMLSF)
The other 2 cannabis ETF offers operate from Canada. One is the Horizons Marijuana Life Sciences Index ETF (OTC: HMLSF), which has a total value of C $ 947.41 million ($ 718.89 million).
The Horizons Marijuana Life Sciences Index ETF seeks to replicate the performance of the North American Marijuana Index, which includes a basket of life sciences stocks who operate in the marijuana industry.
This ETF includes 49 positions, but the top 10 stocks total 76.8%. It includes major cannabis producers such as Cronos Group, Canopy Growth Corp. and Aurora Cannabis, which together represent 33.28% of the fund’s portfolio.
Most of the companies in the ETF’s portfolio are pure cannabis stocks, but it also includes some pharmaceutical companies.
Horizons Junior Marijuana Growers Index ETF (OTC: HZEMF)
Then there is the Horizons Junior Marijuana Growers Index ETF (OTC: HZEMF), which allows investors to gain exposure to smaller cannabis players. It has a market capitalization of C $ 10.80 million and tracks the Emerging Marijuana Producers Index.
The advantage of the Horizons Junior Marijuana Growers Index ETF is that it focuses on small cap stocks, which are generally riskier than established businesses. Bundling them together in an ETF reduces their risk. It’s diverse, with 42 farms and the first 10 positions which amass 54% of the portfolio’s value.
The principal holdings of the Horizons Junior Marijuana Growers Index ETF are Harvest Health & Recreation Inc. (OTC: HRVSF), Terrascend Corp. (OTC: TRSSF), Emerald Health Therapeutics Inc. (OTC: EMHTF), Supreme Cannabis Company Inc. (OTC: SPRWF) and Liberty Health Sciences Inc. (OTC: LHSIF).
Evolve Marijuana ETF (TSE: SEED)
|Origin Agritech||$ 9.67||Buy stocks|
Finally, Evolve Marijuana ETF seeks to invest in a diversified mix of equity securities to provide long-term capital appreciation units to investors. Their the top 10 holdings raise around 65% and include companies such as Aurora Cannabis, Aphria Inc, Canopy Growth, and Tilray.
This ETF and its 27 holdings are aimed primarily at Canadian investors and, like most cannabis ETFs, suitable for those willing to accept a high degree of risk and who do not need a regular source of income from their investments.
Besides marijuana ETFs, a few other funds are also worth mentioning. One is AdvisorShares Vice ETF (NASDAQ: ACT), which focuses on stocks of alcohol, tobacco, restaurants and entertainment.
It also allocates 25% to cannabis-related companies such as Pyxus International Inc. (NYSE: PYX) and a small portion to alcohol and tobacco companies exposed to cannabis, such as Constellation Brands Inc. (NYSE: STZ) and Altria Group (NYSE: MO).
Another is a mutual fund, American Growth Fund (MUTF: AMREX), which invests in growth stocks, primarily technology, such as Facebook Inc. (NASDAQ: FB), Amazon.com Inc. (NASDAQ: AMZN) but also has some exposure to cannabis through investments like GW Pharmaceuticals or KushCo Holdings Inc (OTC: KSHB).
Which Marijuana ETF to choose?
The short answer is it doesn’t matter which Marijuana ETF you choose, because they all share a lot of assets among themselves, less the Horizons Junior Marijuana Index ETF. The cannabis ETF segment is very new and continues to gain ground. There are several options to choose from in case you decide to invest in an ETF instead of building your own portfolio.
The two largest ETFs will give you exposure to the biggest cannabis producers and the biggest pharmaceutical companies that work with cannabinoids.
Take the time to review not only the track record of the ETF, but also its holdings, to make sure that these holdings match your expectations. Marijuana ETFs are also branching out into other industries that have less to do with the plant.
A wise approach might be to scour the market yourself and choose a handful of companies that cover various segments of the cannabis industry and have locations in multiple countries (US, Canada, Europe, and America). Latin), because they are positioned as the best. -performing markets.
Read “Cómo Invertir en Acciones de Cannabis” on ElPlanteo.com.
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