Tuesday , 20 August 2019


Cannabis Central: Don’t Buy A Marijuana ETF Until You’ve Read This Article!

By Lorimer Wilson

Should investors invest in one of the marijuana ETFs? Before doing so one needs to do their homework and this article, unlike any other article you have read on the subject, does just that. This article identifies all the marijuana ETFs currently available and outlines the many differences between them with answers to the following questions:

  • Which ETFs are actively managed?
  • Which has the lowest expense ratio?
  • Which is the most diversified?
  • Which has the most (and least) constituents?
  • Which is the least (and most) volatile?
  • Which best reflects the performance of the pot stock universe?
  • Which was the best performer in July?

To get the answers to the above questions – and become the most informed investor you could possibly be – read on!

Before proceeding it is important to recognize that cannabis is one of the fastest growing current investment themes. To put the opportunity into perspective, the global cannabis market is estimated to reach $630 billion by 2040 up from $12 billion today and U.S.-based cannabis sales are projected to reach US$75 billion by 2030.

The following ETFs provide exposure to a basket of stocks that are expected to benefit from growth of the hemp and legal marijuana industries.

  1. (HMMJ) Horizons Marijuana Life Sciences Index ETF
    • # Constituents: 64
    • Expense Ratio: 0.75%
    • Management: Passive
    • Beta: 3.2
    • Unique Feature: Large number of constituents
    • July Performance: -11.1%
  2. (HMJR) Horizons Emerging Marijuana Growers Index ETF
    • # Constituents: 73
    • Expense Ratio: 0.85%
    • Management: Passive
    • Beta: 2.3
    • Unique Feature: Large number of constituents
    • July Performance: -11.8%
  3. (HMUS) Horizons US Marijuana Index ETF
    • # Constituents: 45
    • Expense Ratio: 0.85%
    • Management: Passive
    • Beta: 2.4
    • Unique Feature: Focuses exclusively on the U.S. Market
    • July Performance: -9.4%
  4. (USMJ) Evolve US Marijuana ETF
    • # Constituents: 43
    • Expense Ratio: 0.75%
    • Management: Active
    • Beta: 1.8
    • Unique Feature: Focuses exclusively on the U.S. Market
    • July Performance: -0.58%
  5. (SEED) Evolve Marijuana ETF
    • # Constituents: 31
    • Expense Ratio: 0.75%
    • Management: Active
    • Beta: 2.4
    • July Performance: -7.8%
  6. (THCX) The Cannabis ETF
    • # Constituents: 35
    • Expense ratio: 0.70%
    • Management: Passive
    • Beta: N/A (too new)
    • July Performance: -9.0%
  7. (YOLO) AdvisorShares Pure Cannabis ETF
    • # Constituents: 25
    • Expense Ratio: 0.74%
    • Management: Active
    • Beta: 0.40
    • Unique Feature: Uses derivatives to provide exposure to stocks considered illegal to list on a U.S. stock exchange
    • July Performance: -12.4%
  8. (CNBS) Amplify Seymour Cannabis ETF  
    • # Constituents: 25-50, currently 30
    • Expense Ratio: 0.75%
    • Management: Active
    • Beta: N/A (too new)
    • Unique Feature: Doesn’t hold any derivatives or swaps
    • July Performance: N/A (less than 1 month old)
  9. (TOKE) The Cambria Cannabis ETF 
    • # Constituents: 31`
    • Expense Ratio: 0.42%
    • Management: Active
    • Beta: N/A (too new)
    • Unique Feature: Lowest expense ratio
    • July Performance: N/A (less than 1 month old)
  10. (MJ) ETFMG Alternative Harvest ETF
    • #Constituents: 37
    • Expense Ratio: 0.75%
    • Management: Passive
    • Beta: 1.9
    • Unique Feature: 45% of ETF weight in tobacco, pharmaceutical & other non-pure cannabis companies
    • July Performance: -11.4%
  11. (ACT) AdvisorShares Vice ETF
    • # Constituents: 30
    • Expense Ratio: 0.75%
    • Management: Active
    • Beta: 0.76
    • Unique Feature: Invests in US-listed companies that generate at least 50% of their revenue from alcohol (30%), cannabis (26%), tobacco (26%) and restaurant/entertainment (16%).
    • July Performance: -0.84%
  12. (HMJU) Horizons Marijuana Companies 2x Daily Bull ETF
    • # Constituents: 22
    • Expense Ratio: 1.45%
    • Management: Active
    • Beta: N/A
    • Unique Feature: Endeavours to correspond to a 2x multiple of the daily performance of the North American MOC Marijuana Index.
    • July Performance: -29.1%
  13. (HMJI) Horizons Marijuana Companies Inverse ETF
    • # Constituents: 22
    • Expense Ratio: 1.45%
    • Management: Active
    • Beta: N/A
    • Unique Feature:  Endeavours to correspond to the single inverse (opposite) of the daily performance of the North American MOC Marijuana Index.
    • July Performance: +15.6%

How Does the Average ETF Compare With the Marijuana Stock Universe?

My analysis of 147 cannabis companies operating in Canada and the U.S. compared to the 13 ETFs reviewed above reveals the following:

  • Average individual “pot” stock universe
    • Beta: 2.9
    • July Performance: -12.7%
  • Average marijuana ETF
    • Beta: 2.3
    • July Performance: -8.26% (excl. HMJU & HMJI)

There you have it! The bold comparison shows that ETFs are the way to go regardless of the one you choose. Which ETF will you choose?

  • the most constituents to maximize your universe diversification i.e. HMMJ (64) or HMJR (73)?
  • the most diverse (non-pure) constituents i.e. ACT or MJ?
  • a US-centric investment philosophy i.e. HMUS or USMJ?
  • the lowest beta to reduce volatility i.e. ACT (0.76) or YOLO (0.40)?
  • the lowest expense ratio i.e. TOKE (0.42%)?
  • an active (8) or passive (5) management style?
  • the most aggressive management styles i.e. HMJU & HMJI?
  • the best performance in July ( excluding HMJU & HMJI) i.e. USMJ (-0.58%) or ACT (-0.84%)?

Which ETF you decide to invest in is up to you but the detailed analysis above should help you get invested in the burgeoning marijuana sector with your eyes wide open.

Editor’s Note:  A hyperlink to this article must be included in any re-posting to avoid copyright infringement.

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