S Another Conservative Way To Indirectly Invest In The Cannabis Sector

If you are reluctant to invest directly in cannabis stocks given that the sector is down -30.5% YTD, consider investing in the 6 tobacco, beer and liquor companies that have invested heavily in the cannabis industry and pay dividends to boot or in the VICE exchange traded fund that pays out a sizeable quarterly distribution. Here is a look at those market sector.

The Conservative Pot Stocks Index

The 6 companies are constituents in what I refer to as the munKNEE Conservative Pot Stocks Index. The performance of its constituents are compared below with their associated cannabis stocks so far in December, as follows, in descending order, with their respective performances YTD in brackets:

  1. Altria Group (MO) is UP +10.3% so far in December (and is UP 11.9% YTD). Its Dividend Yield is now 8.0%.
    • The company has a 45% stake in Cronos Group Inc. (CRON) which is DOWN -38.6% YTD and pays out no dividend.
  2. British American Tobacco (BTI) is UP +7.1% so far in December (and has had No Change in price YTD) and now has a Dividend Yield of 8.1%. 
    • The company has a C$221M investment and product development partnership with Organigram Holdings Inc. (OGI) which is UP +45.1% YTD but pays out no dividend.
  3. Constellation Brands (STZ) is UP +2.6% so far in December (and is UP 7.8% YTD) and now has a Dividend Yield of 1.3%.
    • The company has a 39% stake in Canopy Growth Corporation (CGC) which is DOWN -61.2% YTD and pays out no dividend.
  4. Molson Coors Brewing Company (TAPis UP + 1.4% so far in December (and is UP +2.3% YTD) and now has a Dividend Yield of 2.9%.
    • The company has a 57.5%/42.5% joint venture, called TRUSS, with Hexo Corp. (HEXO) which is DOWN -74.2% YTD and pays out no dividend.
  5. Imperial Brands (IMBBY) is UP +1.1% so far in December (and is UP +4.6% YTD) and now has a Dividend Yield of 12.1%.
    • The company has a 19.9% stake in Auxly Cannabis Group Inc. (CBWTF) which is DOWN -5.0% so far in December (and now DOWN -20.0% YTD) and pays out no dividend.
  6. Anheuser-Busch (BUD) is DOWN -0.5% so far in December (and is now DOWN -17.2% YTD and now has a Dividend Yield of 1.0%.
    • The company has a $100 million joint venture with Tilray Inc. (TLRY) which is UP +4.4% YTD but pays out no dividend.

In Summary

  • Stock Performances:
    • the Conservative Pot Stocks Index is UP +2.7% YTD while
    • their marijuana partners are DOWN -43.4% YTD, on average.
  • Dividend Yields:
    • the Conservative Pot Stocks Index constituents have dividends that currently yield 3.6%, on average, while
    • their marijuana partners pay out no dividends.

AdvisorsShares VICE (VICE) ETF

The case has been made above that investing in a basket of tobacco, beer and spirits companies is a far better way to go than investing in a basket of their associated cannabis stocks. The Conservative Pot Stocks Index, however, is non-tradable, so one might want to consider investing in the AdvisorsShares VICE (VICE) ETF. It is is an actively managed ETF (net expense ratio of 0.99%) that invests in companies that derive at least 50% of their net revenue from:

  1. gambling/casino companies: 36%,
  2. restaurant/hospitality industry: 19%,
  3. alcoholic beverage companies (including Constellation Brands): 17%,
  4. tobacco companies (which include all the tobacco constituents in the Conservative Pot Stocks Index except Imperial Brands): 10%,
  5. video games and eSports sector: 8%, 
  6. psychedelic compound-based clinical-stage drug companies: 1%, and
  7. other sectors: 9%

VICE is up +2.9% YTD compared to +2.7% for the Conservative Pot Stocks Index.

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