Cannabis Comeback: Best-Performing Marijuana Stocks of the Week

The Future of Cannabis Investing: Key ETFs to Keep an Eye on in 2024

The cannabis industry is rapidly evolving, attracting attention from investors seeking long-term growth. As legalization spreads globally, marijuana stocks and ETFs (Exchange-Traded Funds) are becoming key investment areas. Specifically, ETFs offer a diversified approach to this high-potential market.

Recent projections suggest a significant growth trajectory for the cannabis industry. By 2024, the global market could reach $47 billion, a substantial increase from previous years. In general, this growth is fueled by increasing legalization and wider acceptance. Top cannabis ETFs not only capture this growth but also offer potential dividends, enhancing their appeal for long-term investors.

Dividends in cannabis ETFs, although not as common as in other sectors, are beginning to emerge as the industry stabilizes. For investors, this signals a maturing market. Long-term investing in cannabis ETFs offers exposure to a range of companies within the sector. Also, this diversification reduces risk compared to investing in individual stocks. It positions investors to capitalize on the industry’s anticipated expansion.

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Top Cannabis ETFs to Watch in 2024

  1. AdvisorShares Pure US Cannabis ETF (NYSEArca: MSOS)
  2. Amplify Growth Opportunities ETF (NYSEArca: CNBS)
  3. ETFMG Alternative Harvest ETF (NYSEArca: MJ)

The AdvisorShares Pure US Cannabis ETF (MSOS)

The AdvisorShares Pure US Cannabis ETF (MSOS) is notable as the first marijuana exchange-traded fund in the United States. It primarily focuses on American cannabis companies. Its assets are heavily invested in vertically integrated multi-state operators (MSOs), US cannabis REITs, CBD businesses, and hydroponic suppliers.

Q2 2023 Portfolio Review

The MSOS ETF’s portfolio reveals a significant concentration in leading MSOs. The top five holdings have progressively dominated the portfolio. They represented 58.5% in Q1 2022, 66.8% in Q2 2022, 73.5% in Q3 2022, 81.3% in Q4 2022, 78.66% in Q1 2023, and 82.53% in Q2 2023. This trend underscores a strategic focus on the largest players in the US cannabis market.

Top Holdings Analysis

The ETF’s largest holding is Green Thumb Industries (GTBIF) at 26.01%. This is followed by Curaleaf Holdings (CURLF) at 20.15%, Verano Holdings Corp (VRNOF) at 11.88%, Trulieve Cannabis (TCNNF) at 10.98%, and TerrAscend Corp (TRSSF) at 9.57%. Other notable holdings include Cresco Labs Inc (CRLBF), Columbia Care Inc (CCHWF), Glass House Brands (GLASF), Jushi Holdings Inc (JUSHF), and Ayr Wellness Inc (AYRWF). These holdings represent a diverse cross-section of the US cannabis industry, from production to retail.

Potential Impacts on Stock Price

The MSOS ETF’s concentration in top MSOs suggests confidence in these companies’ market leadership and growth potential. This focus might impact stock prices positively, as these firms are likely to benefit most from industry growth and regulatory changes. However, the high concentration also implies increased risk. Performance is heavily dependent on a few key players.

Investment Cases

Bullish Case: The bullish view sees the ETF’s concentration in top MSOs as advantageous. These firms are well-positioned to capitalize on industry growth and potential federal legalization. Their market leadership could translate into significant returns.

Bearish Case: The bearish perspective highlights the risks of concentration. Regulatory hurdles, market volatility, or individual company issues could disproportionately affect the ETF.

Balanced Case: A balanced view appreciates the ETF’s focus on established market leaders while acknowledging the risks of concentration. It suggests a cautious approach, considering the evolving regulatory landscape and market dynamics.

MSOS ETF closed at $5.99 on December 21st, down 12.43% in the past month of trading. This ETF is down 14.31% year to date, with a 52-week price range of $4.78-$9.88.

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Amplify Seymour Cannabis ETF (CNBS)

The Amplify Seymour Cannabis ETF provides significant exposure to the global cannabis industry. It invests over 80% of its assets in companies involved in cannabis and hemp cultivation. This ETF now includes US multi-state operators (MSOs) via swaps, broadening its reach.

Portfolio Composition

The ETF’s portfolio is diverse, reflecting various segments of the cannabis industry. Its top holding is Invesco Short-Term Investment Government & Agency Institutional (AGPXX) at 20.11%. This is followed by Tilray Brands Inc (TLRY) at 10.39%, and Jazz Pharmaceuticals PLC (JAZZ) at 6.39%. GrowGeneration Corp (GRWG) and WM Technology Inc (MAPS) also hold significant positions at 5.42% and 5.02% respectively. Cronos Group Inc (CRON) is another notable holding at 4.70%.

Potential Impacts on Stock Price

The ETF’s diversified portfolio may mitigate risk compared to more concentrated funds. Its exposure to a wide range of cannabis-related businesses, including US MSOs, positions it to benefit from broad sector growth. However, the cannabis industry’s volatility and regulatory uncertainties remain factors that could influence stock prices.

Investment Cases

Bullish Case: The bullish argument emphasizes the ETF’s diversified investment in the cannabis sector. This diversification, combined with exposure to growing US MSOs, positions the ETF to capitalize on the expanding global cannabis market.

Bearish Case: From a bearish viewpoint, the cannabis industry’s inherent volatility and regulatory challenges could negatively impact the ETF. Its performance is tied to an industry still finding its regulatory and economic footing.

Balanced Case: A balanced perspective recognizes the growth potential of the cannabis industry while acknowledging its risks. It views the ETF’s diversification as a strength, offering a more stable investment in a turbulent sector. However, it advises caution given the regulatory uncertainties and market fluctuations in the cannabis space.

On December 21st, the CNBS ETF finished at $3.8699, down 5.84% in the last month of trading. In this case, the ETF is down 23.97% year to date, with a 52-week price range of $3.38-$5.98.

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ETFMG Alternative Harvest ETF (MJ)

The Alternative Harvest ETF (MJ) is a pioneer in the cannabis-focused ETF space. With a net asset value of $386.32 million, MJ stands as one of the largest global cannabis ETFs. It’s the first and only US-listed ETF solely dedicated to the global cannabis industry. The fund offers investors exposure to legal, medicinal, and merger and acquisition activities in the cannabis sector.

Portfolio Composition

MJ’s portfolio showcases a unique mix of holdings. Its largest is the ETFMG US Alternative Harvest ETF (MJUS), comprising 52.79% of the assets. The ETFMG Sit Ultra Short ETF (VALT) follows at 8.89%. Tilray Brands Inc (TLRY) holds 8.68%, and SNDL Inc (SNDL) comprises 6.05%. Other significant holdings include Cronos Group Inc (CRON), Chicago Atlantic Real Estate Finance Inc (REFI), Aurora Cannabis Inc (ACB), Canopy Growth Corp (WEED), OrganiGram Holdings Inc (OGI), and High Tide Inc (HITI).

Potential Impacts on Stock Price

MJ’s substantial investment in MJUS indicates a strategy focused on US cannabis markets. This could be advantageous as the US market expands. However, the concentration in a single ETF poses a risk. The diverse nature of the remaining holdings may mitigate this, offering stability through sector-wide exposure.

Investment Cases

Bullish Case: The bullish perspective views MJ’s large size and US focus as strengths. These factors, along with its exposure to various aspects of the cannabis industry, position it well to capitalize on sector growth.

Bearish Case: The bearish view focuses on the risks of MJ’s heavy concentration in MJUS. Market volatility and regulatory uncertainties in the cannabis industry could negatively impact the fund.

Balanced Case: A balanced view recognizes MJ’s potential to benefit from the growing cannabis industry while noting the risks of its concentrated holdings. It suggests a cautious investment approach, mindful of the evolving landscape and inherent volatility of the cannabis market.

MJ ETF closed on December 21st    at $2.99, down 4.17% in the last month’s trading. In this case, MJ ETF has a 52-week price range of $2.64-$4.84 and is down 29.81% year to date.

Essential Cannabis ETFs to Watch in 2024

In 2024, top cannabis ETFs like the AdvisorShares Pure US Cannabis ETF (MSOS), Amplify Seymour Cannabis ETF, and Alternative Harvest ETF (MJ) will be key players to watch. In addition, each fund offers unique exposure to the cannabis industry. MSOS focuses on US multi-state operators, capturing domestic market growth. The Amplify Seymour ETF diversifies globally, including US MSOs via swaps. MJ, being one of the first and largest, offers a broad view of the global cannabis market.

In general, these ETFs are positioned to capitalize on the expanding cannabis industry, each with distinct strategies and holdings. MSOS’s concentration on top US MSOs could yield significant returns if the US market continues to grow. The Amplify Seymour ETF’s diversified approach reduces risk, making it a compelling option for cautious investors. MJ’s comprehensive global focus encompasses a wide range of cannabis-related activities, from legal to medicinal. Overall, as the industry evolves, these ETFs will likely be at the forefront, offering diverse opportunities for investors in the dynamic cannabis market.

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