E "Marijuana" ETFs: A Troubling Expose

When you check out the constituent makeup of the 11 publicly traded "marijuana" ETFs (listed below) you will notice that they include a large percentage of pharmaceutical, real estate, grower supply, and tobacco/spirit companies. How can that be?

Shouldn't the ETFs consist of baskets of true marijuana stocks that reflect the performance of the industry sector-based, albeit, with differing listing criteria? Below is a look at what these supposed "cannabis" ETFs consist of and why it is virtually impossible to compare their respective performances.

Here's what is behind their subtle misdirection. In an attempt to put together a basket of stocks in the cannabis sector that will do well and, therefore, attract investors, most ETF managers have taken major liberties with the definition of a "marijuana" company.

  • Since when is a pharmaceutical company a marijuana company because it has a product under development that has some cannabis in its formulation?
    • 9 of the 11 cannabis ETFs do just that and they are doing so to juice their respective performances.
      • The marijuana market is DOWN 27% YTD according to the pure-play Non-penny Pot Stock Index so having pharmaceutical companies like
        • GW Pharmaceuticals (GWPH)(+21% YTD);
        • Corbus (CRBP)(+44.9% YTD);
        • Arena (ARNA)(+39.8% YTD);
        • Cara (CARA)(+9.0% YTD)
        • and XPhyto (XPHYF)(+209.3% YTD)
      • make my point.
  •  Since when is a REIT a marijuana company? Sure, all its properties might be leasebacks of the facilities of marijuana cultivators but they are, first and foremost, real estate investment trusts with all the advantages that such security entails. Innovative Industrial Properties Inc. is a case in point and no wonder it is included in 4 of the 11 marijuana ETFs - it is UP 30.2% YTD vs. a decline of -27% YTD for the pure-play NPSI.
  • Since when is a fertilizer supply company (i.e. Scotts Miracle-Gro) that has a product that contains cannabis considered a marijuana company or a company that provides gardening supplies and hydroponic equipment (GrowGeneration)? When their stocks are performing well (+31.7% YTD and 64.6% YTD respectively).
  • Since when is a tobacco, liquor, or beer company a marijuana company just because it has invested in a marijuana company?
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Weed Investor 3 months ago Member's comment

Wow, this was pretty eye opening. Thanks Lorimer!

Lorimer Wilson 3 months ago Author's comment

Please share this insightful analysis with all your contacts in the marijuana industry. The real situation has to be revealed. I hate the spin that Marijuana hypsters put on things.

Weed Investor 3 months ago Member's comment

I've already shared the link with my friends. Thanks.