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 | | | Old Dawgs vs. New Kids on the Block: A Breakdown of Today's Marijuana ETFs | | Matthew Carr | Chief Trends Strategist | The Oxford Club | | | | | Marijuana legalization is spreading. Not just across the U.S., but across the world.
As marijuana becomes more mainstream, more and more investors are tuning in to the space. They're paying attention. They want in. And they want options.
Fortunately for us investors, the market is catering to these demands. Today, there are a slew of new cannabis exchange-traded funds (ETFs), including inverse and leveraged options.
For the longest time there was only one cannabis ETF - the Horizons Marijuana Life Sciences Index ETF (OTC: HMLSF).
Then one became two when the ETFMG Alternative Harvest ETF (NYSE: MJ) transitioned from an international real estate fund to a pot-focused fund. All of a sudden, we have a buffet of choices - with more than a half-dozen options.
With all these new options, I wanted to revisit our cannabis ETF primer. And dig a little deeper into several of the more easily traded ones to highlight any differences, particularly in the top 10 holdings. | | | Golden Oldies
Let's start with the most well-known and our standard benchmark, the Horizons Marijuana ETF.
This launched in Canada and is primarily focused on that market, so the top 10 holdings shouldn't be too shocking... Right off the bat, we see the largest weighting is Canopy Growth Corp. (NYSE: CGC).
This is why I often say, where Canopy goes, so goes the sector.
I think it's prudent to point out that the 11.35% that Canopy accounts for is far and away the single largest weighting in any sector ETF.
In fact, the Horizons Marijuana ETF's top four holdings - Canopy, Aurora Cannabis (NYSE: ACB), Cronos Group (Nasdaq: CRON) and Tilray (Nasdaq: TLRY) - account for 41.26% of the fund.
But we do see some U.S. holdings, including GW Pharmaceuticals (Nasdaq: GWPH), Scotts Miracle-Gro (NYSE: SMG) and Charlotte's Web Holdings (OTC: CWBHF).
These are the only American pot stocks the ETF can hold because their businesses are federally legal in the U.S.
The reality is, these top 10 holdings make up 72.9% of the ETF's total holdings. The rest of the positions it holds are only fractions of a percent. So those 10 are basically what you get.
The other, more established pot stock ETF - the Alternative Harvest ETF - is a much different story.
Its top 10 holdings are weighted more heavily toward biotech... GW Pharma is the largest holding. And besides Cronos being the heaviest-weighted Canadian producer, the fund substitutes Corbus Pharmaceuticals (Nasdaq: CRBP) and The Green Organic Dutchman (OTC: TGODF) for Scotts Miracle-Gro and Charlotte's Web in the top 10.
This ETF's top 10 holdings account for 57.74% of its assets. And it also provides exposure to Innovative Industrial Properties (NYSE: IIPR), Arena Pharmaceuticals (Nasdaq: ARNA), Cara Therapeutics (Nasdaq: CARA), Zynerba Pharmaceuticals (Nasdaq: ZYNE) and a number of international tobacco plays.
The differences between the two "old dawgs" have led to a difference in returns... The more heavily weighted Canadian producer approach of the Horizons Marijuana ETF has resulted in an outperformance of 3% so far in 2019.
Next, let's look at some of the more recent cannabis offerings...
New Kids on the Block
Back in April, the AdvisorShares Pure Cannabis ETF (NYSE: YOLO) launched. This was the first actively managed cannabis ETF located in the U.S. to be available.
And as its ticker suggests, "YOLO" is taking a different approach to the sector... The ETF's largest position is in the cannabis real estate investment trust Innovative Industrial. The second-largest holding is what I believe is still an underappreciated play, OrganiGram Holdings (Nasdaq: OGI). And then we see the extraction company Neptune Wellness Solutions (NYSE: NEPT) and North American greenhouse operator Village Farms International (Nasdaq: VFF).
The Pure Cannabis ETF's top 10 holdings account for just 48.7% of its assets. The remainder is made up of 24 other pot stocks that include American multistate operators, Canadian producers and biotechs.
It's the most well-rounded of the sector ETFs, in my opinion.
Another one of the new kids on the block is Innovation Shares' The Cannabis ETF (NYSE: THCX).
Again, no big surprises here... We see Cronos and GW Pharma are the most heavily weighted, similar to the Alternative Harvest ETF. Innovative Industrial and Scotts Miracle-Gro are on the list as well.
The Cannabis ETF's top 10 holdings account for 62.1% of its assets. So they're what you're investing in for the most part.
Its holdings outside of this include interesting plays like Colombian medical grower PharmaCielo (OTC: PHCEF), extractor Radient Technologies (OTC: RDDTF) and lightbulb maker Cree (Nasdaq: CREE). But the exposure to each is fairly small.
These two new ETFs launched in a difficult period for pot stocks. But their performance is largely in line with the "old dawgs" in recent weeks... Of course, the four ETFs I covered today aren't the only options. For example, there's the Horizons Emerging Marijuana Growers ETF (NEO: HMJR), the Horizons US Marijuana Index ETF (NEO: HMUS), leveraged plays and more. But those aren't as easily available to U.S. retail investors.
Though the only cannabis ETF celebrating over the past couple months has been the BetaPro Marijuana Companies Inverse ETF (HMJI.TO)...
We have to remember that this is a marathon, not a sprint.
For those investors looking for a one-stop shop providing exposure to the industry over the long haul, the avenues to do so continue to expand. And they're not all cast from the same mold.
Here's to high returns,
Matthew | | | | |  | | | | | |  |  | | | | Anthony Summers | July 24, 2019 AR and VR have applications in a wide range of industries, though video games and social media stand out so far. Read More | | | | |  | | | | Matthew Carr | July 23, 2019 Unprecedented fluctuations in cannabis have led to a rise in short interest - and companies are feeling the heat. Read More | | | | |  | | | | Matthew Carr | July 22, 2019 Curaleaf announced its acquisition of GR Companies, making it one of the largest cannabis companies in the world. Read More | | | | | | | | | | |
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The Oxford Club is a financial publisher that does not offer any personal financial advice or advocate the purchase or sale of any security or investment for any specific individual. Members should be aware that although our track record is highly rated by an independent analysis and has been legally reviewed, investment markets have inherent risks and there can be no guarantee of future profits. The stated returns may also include option trades. 
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