It remains difficult to say which marijuana growers will prosper the most with legalization. More certain is that overall demand for cannabis will continue to expand. One way for investors to cut risk is to diversify with firms that will benefit from industry growth no matter which producers thrive.
This ETF aims to benefit from the potential profitability of the cannabis industry as a whole—not just producers.
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HORIZONS MARIJUANA LIFE SCIENCES ETF $26.13 (Toronto symbol HMMJ; Units outstanding: 45.7 million; Market cap: $1.2 billion; TSI Cannabis Quality Rating (CQR): ; www.horizonsetfs.com) invests in North American firms that are legally involved in the cannabis industry.
The fund tracks the North American Marijuana Index. Canadian companies make up 80% of the portfolio, the U.S. 12%, and the U.K. 8%. The ETF invests in cannabis growers and cultivators, as well as bio-pharmaceutical companies and support firms such as lighting technology and fertilizer companies.
Despite its 48 different stocks, the ETF’s holdings are still highly concentrated in growers: just four of those make up over 50% of the fund’s assets.
The top 10 holdings are Canopy Growth (Canada, 16.6%), Aurora Cannabis (Canada, 15.0%), Aphria (Canada, 12.5%), GW Pharmaceuticals (U.K., 7.6%), Cronos Group (Canada, 7.2%), Scotts Miracle-Gro (U.S., 6.6%), The Green Organic Dutchman Holdings (Canada, 4.6%), HEXO Corp. (Canada, 4.3%), CannTrust Holdings (Canada, 3.6%), and Organigram Holdings (Canada, 2.6%).
The ETF launched in April 2017. It charges a relatively high MER of 0.75%, but has a reasonable size. An average of $23 million in units trade daily, which provides ample liquidity.
The fund has gained 144.5% over the last year, while the broad-based S&P/TSX Composite Index rose 5.5%. Given the 2018 forecast earnings for the stocks it holds, the ETF’s p/e is 56.8.
Most of the stocks that the ETF holds don’t pay dividends. However, Horizons earns money by lending those stocks to short sellers. The short sellers then sell them, hoping to buy them back later at a lower price.
Thanks to those funds, the ETF has now paid four quarterly distributions since October 2017. The trailing 12-month total payment of $0.83303 a unit yields 3.6%. However, cash inflows from short sellers are highly volatile and the ETF’s distributions (and yield) could suddenly drop.
The Horizons Marijuana Life Sciences ETF has a 3-Leaf Cannabis Quality Rating (CQR).
For investors who want exposure to marijuana markets, this ETF partially cuts the risk of uncertain long-term outlooks for cannabis producers. Still, this fund is okay to hold only for highly aggressive investors willing to accept the risks of investing in cannabis and cannabis-related stocks.
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Shopify (SHOP on both Canadian and US exchanges) is a Canadian e-commerce platform that has signed deals with multiple provinces to provide marijuana ordering platforms. SHOP is a well established company with high adoption and is a great way to participate in the current marijuana craze in a safe way.
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Shopify (SHOP on both Canadian and US exchanges) is a Canadian e-commerce platform that has signed deals with multiple provinces to provide marijuana ordering platforms. SHOP is a well established company with high adoption and is a great way to participate in the current marijuana craze in a safe way.