Cannabis ETFs Trending Up To Start Q4

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Amid the market turmoil where all sectors are juggling with uncertainty and volatility, cannabis stocks and ETFs gained momentum to start the fourth quarter. This is especially thanks to President Joe’sannouncement of a historic marijuana reform, including the pardoning of previous federal offenses of simple possession, last week.

As such, investors should bet on the ETFs targeting these stocks. AdvisorShares Pure US Cannabis ETF (MSOS - Free Report), ETFMG U.S. Alternative Harvest ETF (MJUS - Free Report), Amplify Seymour Cannabis ETF (CNBS - Free Report), Roundhill Cannabis ETF (WEED - Free Report), and AdvisorShares Pure Cannabis ETF (YOLO - Free Report) have been leading the way higher over the past week and will likely continue doing so.

President Joe Biden took executive action to change U.S. policy on the drug, pardoning all prior federal offenses of simple marijuana possession. Biden asked federal officials to start a review process of how marijuana is "scheduled," or classified, under federal law. "Federal law currently classifies marijuana in Schedule I of the Controlled Substances Act,” the classification meant for the most dangerous substances like heroin and LSD.

The move has spread optimism in the industry and for companies that are growing and distributing cannabis products. It raised hopes of further measures that could be friendly to the cannabis industry, including potential decriminalization or legalization.

Early this year, the House passed a bill to legalize marijuana nationwide. The bill called the Marijuana Opportunity Reinvestment and Expungement Act, or MORE Act, would remove marijuana from the list of banned controlled substances and establish a process to expunge prior cannabis convictions. It also will impose a federal tax on marijuana products— a 5% excise tax for the first two years, increasing by 1% incrementally each year over the next three years.

According to BDSA, U.S. cannabis sales are expected to reach $42 billion in 2026 from $25 billon in 2021. This will make up 75% of the total global cannabis sales. Meanwhile, legal cannabis sales in the United States are expected to reach $27 billion by the end of 2022, up 7% from last year, despite an inflationary environment and concerns about recession that dampened consumer spending.

Let’s delve into each of the ETFs in detail below:

AdvisorShares Pure US Cannabis ETF (MSOS) – Up 8.7%

AdvisorShares Pure US Cannabis ETF is the first actively managed U.S.-listed ETF with dedicated cannabis exposure focusing exclusively on U.S. companies, including multi-state operators (MSOs). It holds 30 securities in its basket with a double-digit concentration on the top four firms. AdvisorShares Pure US Cannabis ETF is highly skewed toward MSOs in terms of sector, making up for 93.3% of the portfolio. 

AdvisorShares Pure US Cannabis ETF has amassed $661.1 million in its asset base while trading in an average daily volume of $1.8 million shares. AdvisorShares Pure US Cannabis ETF charges 73 bps in annual fees.

ETFMG U.S. Alternative Harvest ETF (MJUS) – Up 7.8%

ETFMG U.S. Alternative Harvest ETF is designed to provide investors exposure to cannabis companies operating in the United States, including MSOs directly involved in the cultivation, production, marketing, and distribution of cannabis or cannabis-related products. It holds 26 stocks in its basket with heavy concentration of the four firms.  

ETFMG U.S. Alternative Harvest ETF has amassed $102.2 million in its asset base and charges 75 bps in annual fees. It trades in volume of 34,000 shares a day.

Amplify Seymour Cannabis ETF (CNBS) – Up 3.5%

Amplify Seymour Cannabis ETF is an actively managed fund which, invests at least 80% of its assets in securities of companies with 50% or more of their revenues from the cannabis and hemp ecosystem. CNBS holds 34 securities in its basket, with each making up for no more than 11.2% of assets. Amplify Seymour Cannabis ETF provides 67.1% exposure to American firms and 28.2% to the Canadian firms.

MSOs is the top industry in the CNBS basket at 39%, while cultivation and retail makes up for 26%. With AUM of $40.4 million, Amplify Seymour Cannabis ETF charges 75 bps in annual fees and trades in an average daily volume of 25,000 shares.

Roundhill Cannabis ETF (WEED) – Up 2.2%

Roundhill Cannabis ETF is designed to offer investors exposure to the cannabis sector. The fund may invest in various cannabis related companies, including: (i) cannabis producers and distributors, (ii) cannabis-related technology companies, and (iii) additional cannabis related ancillary businesses. It holds 6 stocks in its basket with heavy concentration on the top four firms.

Roundhill Cannabis ETF debuted in the space in April and has gathered $1.5 million in its asset base so far. It charges 39 bps in annual fees and trades in 6,000 shares a day on average.

AdvisorShares Pure Cannabis ETF (YOLO) – Up 1.8%

AdvisorShares Pure Cannabis ETF is also an actively managed fund with a dedicated cannabis investment mandate domiciled in the United States. YOLO seeks long-term capital appreciation by investing in both domestic and foreign cannabis equity securities. AdvisorShares Pure Cannabis ETF holds a basket of 26 stocks with a double-digit exposure to the top two firms. American firms make up 61.4% of the portfolio, followed by a 28.7% share of the Canadian firms.

AdvisorShares Pure Cannabis ETF has gathered $64.6 million in its asset base and charges 76 bps in annual fees. YOLO trades in an average daily volume of 64,000 shares.

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Disclosure: contains statements and statistics that have been obtained from sources believed to be reliable but are not guaranteed as to accuracy or completeness. References to any ...

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