Thursday , 22 October 2020

Cannabis Central: New Global X Cannabis ETF Offers Nothing Unique

As long anticipated, Global X has finally launched its very own Cannabis ETF (Nasdaq:POTX) this past Wednesday joining 14 other ETFs already trading on various Canadian and American stock exchanges. This article highlights its offering and compares it with the others in the crowded marketplace. #munKNEE/Money!

By Lorimer Wilson

As mentioned on the Global X site, the ETF seeks to invest in companies involved in the legal production, growth and distribution of cannabis and industrial hemp, in pharmaceutical companies using cannabis in some of their medicines as well as companies involved in providing financial services to the cannabis industry and seeks to provide investment results that match the Cannabis Index.

POTX joins 5 other cannabis ETFs, namely, NEO:HMUS, NEO:HMJR, TSX:HMMJ, NYSE:THCX and NYSE:MJ, that are passively managed with expense ratios of .85%, .85%, .75%, .70% and .75%, respectively. Nasdaq:POTX has the lowest expense ratio among the passively managed ETFs at only .50% second only to CBOE:TOKE, an actively managed cannabis ETF with an expense ratio of just .42%.

POTX has 24 constituents of which the top 10 account for 68.09% and are as follows, in order of weight:

  1. Canopy Growth (TSX:WEED; NYSE:GCG): 9.12%
  2. GW Pharma (Nasdaq:GWPH): 8.16%
  3. HEXO (TSX:HEXO; NYSE:HEXO): 8.14%
  4. Aphria (TSX:APHA; NYSE:APHA): 8.04%
  5. Aurora (TSX:ACB; NYSE:ACB): 7.86%
  6. Cronos (TSX:CRON; Nasdaq:CRON): 7.84%
  7. Tilray (Nasdaq:TLRY): 4.84%
  8. Charlotte’s Web(TSX:CWEB); 4.81%
  9. MediPharm (TSX:LABS): 4.66%
  10. OrganiGram (TSX:OGI; Nasdaq:OGI): 4.62%

Interestingly, the top 10 constituents in POTX are identical to those in HMMJ (67.75% in total) and THCX (56.48%) and identical to 8 out of the 10 in MJ (51.84%). That being the case, it suggests that the only reason to invest in POTX is because of its expense ratio of 0.50% vs. 0.70% – 0.75% for those other 3. There may be merit in buying POTX on that basis but its performance vis-a-vis HMMJ, THCX and MJ should be monitored closely over the next 2 months to see what influence its constituent make-up and constituent weightings have on its returns at which time an informed decision can be made.

Related Article from the munKNEE Vault:

Cannabis Central: All You Need To Know About the “Pot” Stocks/ETFs Sector