The Only Two Marijuana ETFs Worth Considering

North America is experiencing one of the biggest economic booms in history.

All thanks to marijuana.

While the topic is a controversial one, it’s also one of the most profitable.

Better yet, three powerful catalysts have the potential to send them even higher.

Catalyst No. 1 -- Americans Support Legalization

A growing majority of Americans fully support its legalization, which has led to its decriminalization and the potential for significant cash inflows.

- In 2017, Colorado’s marijuana industry generated $1.3 billion in sales and $200 million in tax revenue.  It’s also helped create 18,000 jobs just in this state.

- Washington State could generate up to $155 million in marijuana related taxes this year. By 2022, it could generate more than $1 billion.

- California could see $5 billion in revenue from recent legalization. Recreational sales here could soon double the size of the marijuana market.

- In Nevada, the projection is a whopping $6 billion, while Massachusetts is estimated to see around $1.5 billion in gross sales.  Maine is projected to enjoy $290 million in gross sales annually.  In Florida, legalization could generate up to $2 billion in annual sales. North Dakota could see $75 million just starting out.

- New Mexico already allows for its medical use but could expand laws, as well, especially to help reduce the state’s massive budget deficit. Within the first year of such sales, estimates say the state could see $60 to $70 million added to the state budget.

 Another 15 states are pushing for legalization, too.



Catalyst No. 2 -- Canada will Legalize Marijuana on October 17, 2018                                    

The Canadian Senate overwhelmingly passed Bill C-45, also known as the Cannabis Act, which legalized the use of recreational marijuana. The law goes into effect on October 17, 2018. While it’ll take Canadian provinces a few weeks to ramp up for likely demand, the law opens a sizable market.

By 2021 analysts say Canada could have nearly four million recreational marijuana users, creating a monstrous $4.5 billion industry. The industry could balloon to $8.7 billion shortly thereafter, as marijuana retail sales just in Canada are likely to surpass beer, wine and spirit sales combined. That’s big money.

In short, this approval could set off another boom.

By 2021 analysts say Canada could have nearly four million recreational marijuana users, creating a monstrous $4.5 billion industry. The industry could balloon to $8.7 billion shortly after, as marijuana retail sales just in Canada are likely to surpass beer, wine and spirit sales combined. That’s big money.

Catalyst No. 3 -- Corporate America is Waking up to the Opportunity

Constellation Brands just increased its stake in Canopy Growth (CGC) by $4 billion -- part of the reason CGC exploded in recent days. That comes just 10 months after Constellation first took a 10% stake in Canopy to help create nonalcoholic cannabis-infused drinks and other products.

Constellation’s investment in Canopy -- the biggest known deal in the marijuana industry -- shows just how far traditional alcoholic beverage companies are willing to go to find growth. As sales of beer fall in the United States, brewers have begun to bet that legalization of marijuana around the globe, especially the United States, will continue to build momentum and sales of cannabis products will take off.  Legal sales alone could be worth $47 billion within a decade, note analysts at RBC.

Molson Coors even listed legal cannabis among the biggest possible risks to its business in its annual shareholder report.

“The emergence of legal cannabis in certain U.S. states and Canada may result in a shift of discretionary income away from our products or a change in consumer preferences away from beer," they noted.

How to Trade the Boom

While we can always buy some of the top marijuana stocks in the sector, including Canopy Growth, OrganiGram Holdings, and even GW Pharmaceuticals, one of the best ways to gain exposure and diversify is with ETFs.

ETFMG Alternative Harvest ETF (MJ)

The ETFMG Alternative Harvest ETF (MJ) offers investors access to the Canadian and global marijuana sector. The fund tracks an index of stocks across the globe that are engaged in the legal cultivation, production, marketing or distribution of cannabis products for either medical or nonmedical purposes. MJ also holds stocks of companies that trade or produce tobacco or tobacco products, or fertilizers, plant foods, pesticides or growing equipment for cannabis or tobacco. In addition, the fund can hold pharmaceutical companies that produce, market or distribute drug products that use cannabinoids. 

MJ has holdings in Canopy Growth, Aurora Cannabis, Cronos Group Inc., GW Pharmaceuticals, and OrganiGram Holdings for example.

Horizons Marijuana Life Sciences Index ETF (HMLSF)

The Horizons Marijuana Life Sciences Index ETF seeks to replicate, to the extent possible, the performance of the North American Marijuana Index, net of expenses. The Index is designed to provide exposure to the performance of a basket of North American publicly listed life sciences companies with significant business activities in the marijuana industry.

It has holdings in Aurora Cannabis, Canopy Growth, Aphria Inc. Cronos Group, and CannTrust Holdings for example.

 

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