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Cannabis ETFs Dominating 2020: Will They Persist?

cannabis stocks ETF

2019 was not a good year for the cannabis stocks. They were beaten convincingly, with a majority of them losing more than half of their value. Weak earnings and a Food and Drug Administration warning that cannabidiol can injure the liver and other internal organs eliminated the lustre from the industry.

The trend seems to be reversing in 2020 as more states are exerting more significant legislative push to legalize recreational marijuana. The latest reports show that up to 12 states could legalize medical or adult-use cannabis in 2020. The states will do so either through ballot measures or their legislatures.

The Governor of New York, Andrew Cuomo, committed to legalizing recreational marijuana in the state. It could potentially generate hundreds of millions of dollars in revenues. According to Cuomo, legalizing cannabis will rake in $300 million yearly in tax revenues. If the governor succeeds, New York will become the 13th state in the United States to legalize recreational cannabis. 

Projections from BDS Analytics suggest that New York may grow to a $1.6 billion weed market by 2024. The other states to legalize this product include New Jersey, South Dakota, Arizona, Minnesota, North Dakota, Delaware, New Mexico, Florida, and Montana. 

Illinois legalization saw shoppers spend a staggering $20 million on recreational marijuana during the first 12 days of legalization. $13 million of that was spent in the first week. Also, the expansion of retail infrastructure in Ontario and larger Canada is increasing optimism. The Canadian state plans to have at least 250 cannabis stores by the end of the year. 

The global cannabis market might reach $97.35 billion by the end of 2026 with the rollout of legal marijuana products in Canada acting as the most significant catalyst.  

Top Performing ETFs

ETFMG Alternative Harvest ETF MJ is the biggest globally, focusing on the worldwide cannabis industry. It holds 37 securities in its basket. Canadian firms make up 54% of its portfolio. On the other hand, American firms make up 28%. This ETF has AUM of $764.4 million trading in a substantial volume of almost 773,000 shares. Currently, it charges 75 basis points in yearly fees and has gained at least 9.5% in 2020.

Global X Cannabis ETF POTX invests in companies in the marijuana sector while tracking the Cannabis Index. It has a basket of 26 stocks with Canadian firms accounting for 81.7% of assets. This ETF has accumulated $7.7 million in its asset base within four months, trading 15,000 shares on average. It has so far gained 12.6% in 2020.

AdvisorShares Pure Cannabis ETF YOLO is the first actively managed ETF domiciled in the United States. It has 38 stocks in its basket with Canada and the US, making up 47% of the firms each. Since its April 2019 launch, it has acquired $46.1 million in its asset base charging 74 bps in annual fees. It trades 57,000 shares on average daily, and it has gained 6.5% in 2020.  

The Cannabis ETF THCX holds 33 stocks in its basket, with Canadian companies making 62% share with the US taking 24% of assets. It has acquired $18 million in AUM and trades 46,000 shares per day. The ETF charges 70 bps in annual fees and has increased by 9.7% so far in 2020.

Cambria Cannabis ETF TOKE seeks to invest in about 20 to 50 of the top companies based on Cambria’s determination to their exposure to the industry. Its basket has 34 stocks, with Canada taking 61.7% of total assets, and the US settles for 27.1%. It trades 14,000 shares daily and has $10.8 million in AUM. It charges 42 bps in yearly fees and has gained 6.5% so far this year.

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