As a result of the growing level of mainstream interest in the burgeoning marijuana industry the S&P/TSX has recently launched two indices, the S&P/TSX Cannabis Index and the S&P/MX International Cannabis Index.
By: Lorimer Wilson
- The S&P/TSX Cannabis Index (TSX:XCAN) tracks the performance of a basket of cannabis companies trading on the TSX and the TSXV.
- The S&P/MX International Cannabis Index (TSX:MCAN) tracks the performance of cannabis firms trading on the Toronto Stock Exchange (TSX), TSX Venture Exchange (TSXV), New York Stock Exchange (NYSE) or Nasdaq.
Interestingly, neither index includes any U.S. multi-state operators (MSOs), i.e. cannabis stocks with operations based in the United States, because of the fact that cannabis is illegal in the U.S. at the federal level, but they do include companies with strictly hemp-based operations as a result of the passing of the 2018 Farm Bill which legalized hemp in the United States containing 0.3% THC and under.
The S&P/TSX Cannabis Index (TSX:XCAN) consist of the following 15 constituents (who have an average market cap of US$677M):
- Canopy Growth (WEED)
- Aurora Cannabis (ACB)
- Cronos Group (CRON)
- Aphria (APHA)
- Charlotte’s Web (CWEB)
- OrganiGram Holdings (OGI)
- MediPharm Labs (LABS)
- HEXO Corp. (HEXO)
- Auxly Cannabis (XLY)
- Valens GroWorks (VLNS)
- Village Farms (VFF)
- Neptune Wellness (NEPT)
- PharmaCielo (PCLO)
- Green Organic Dutchman (TGOD)
- Supreme Cannabis (FIRE)
The S&P/MX International Cannabis Index (TSX:MCAN) consist of the following 21 constituents (who have an average market cap of US$771M):
- Canopy Growth (TSX: WEED) (NYSE: CGC)
- Cronos Group (TSX: CRON) (NASDAQ: CRON)
- GW Pharmaceuticals (NASDAQ: GWPH)
- Aurora Cannabis (TSX: ACB) (NYSE: ACB)
- Arena Pharmaceuticals (NASDAQ: ARNA)
- Tilray (NASDAQ: TLRY)
- Aphria (TSX: APHA) (NYSE: APHA)
- Charlotte’s Web (TSX: CWEB)
- OrganiGram Holdings (TSX: OGI) (NASDAQ: OGI)
- HEXO Corp. (TSX: HEXO) (NYSE: HEXO)
- MediPharm Labs (TSX: LABS)
- Valens GroWorks (TSXV: VLNS)
- Corbus Pharma (NASDAQ: CRBP)
- Village Farms (TSX: VFF) (NASDAQ: VFF)
- Neptune Wellness (TSX: NEPT) (NASDAQ: NEPT)
- Pharmacielo (TSXV: PCLO)
- Canopy Rivers (TSX: RIV)
- Green Organic Dutchman (TSX: TGOD)
- Supreme Cannabis (TSX: FIRE)
- Aleafia Health (TSX: ALEF)
- Zynerba Pharmaceuticals (NASDAQ: ZYNE)
On Monday, April 6th,
- the XCAN (with an average market cap of US$677M) went up 4.4% (based on the above 15 constituents that trade on either the TSX or the TSXV),
- the MCAN (with an average market cap of US$771M) went up 4.9% (based on the above 21 constituents that trade on the TSX and TSXV as well as the NYSE and Nasdaq), and
- the NPSI – my proprietary Non-penny Pot Stock Index – has an average market cap of $US677M and went up 6.2% based on the 32 stocks that trade on the above exchanges as well as the Canadian Securities Exchange (CSE), the NEO exchange and Over The Counter (OTC) for US$1/share or more) while
- the market as a whole (based on the adjusted EQM Global Cannabis Index of 66 constituents averaging US$356M) only went up 2.6%.
As you can see from the above information, determining how well the cannabis stock sector is doing over any given period depends on the tracking index you prefer.
- By the very nature of the criteria for being included in the MCAN and XCAN indices (i.e. having to be listed on major North American stock exchanges) their average market caps are greater than the other 9 tracking indexes that exist and, as such, they are not reflective of the cannabis stocks as a whole.
- I personally like to base my determination of sector performance – and investment possibilities – on the 32 stocks that trade above US$1/share as included in my proprietary Non-penny Pot Stock Index (NPSI).
- At this point in time, my second choice – just for tracking the sector performance, in general – is the EQM Global Cannabis Index because of its very large number of constituents compared to all the other trackers and its much lower average market cap both of which convey that it is tracking a larger number of smaller cannabis companies and, as such, is very representative of the cannabis market as a whole.