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Cannabis ETFs Set to Soar in 2021 on More U.S. Legalization
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The cannabis stocks have been on a smooth ride post election buoyed by legalization hopes in more U.S. states and will continue to shine heading into the next year. With the start of the transition to Joe Biden’s presidency, markets are highly optimistic that the incoming administration will speed up the legalization of marijuana at the federal level, thereby providing a boost to the U.S. cannabis industry.
The successful ballot initiatives in five states — New Jersey, Arizona, South Dakota, Montana and Mississippi — last month broadened the potential market for legal cannabis sales, indicating wider acceptance of marijuana throughout the United States. Voters in New Jersey, Arizona, Montana and South Dakota approved legalizing sales of marijuana for adults. South Dakota also approved sales for its medical use, as did Mississippi.
According to industry tracker BDSA, the expansion of sales to adults alone represents a nearly 20% increase in the potential U.S. market for legal cannabis. As of now, 36 states have legalized medical cannabis use while 15 states and the District of Columbia have legalized cannabis for adult recreational use.
With increasing adoption and more legalization optimism, most analysts upgraded their growth outlook for the industry. Cowen projects the legal marijuana market to grow to $34 billion by 2025, up from an earlier forecast of $31 billion. Morningstar estimates that annual U.S. cannabis sales will reach $70 billion for the adult-use segment and $15 billion for medical (read: Why Cannabis Stocks & ETFs Are Soaring).
Additionally, the U.S. House of Representatives, early this month, passed a bill — the MORE Act — to decriminalize cannabis at the national level for the first time. The bill would remove cannabis from the list of federally controlled substances and erase certain federal convictions. However, the final approval is pending from the Republican majority Senate, which is not expected anytime soon.
Further, the United Nations commission voted to remove marijuana for medical use from the category of dangerous drugs. The historic move will not only pave the way to for marijuana research and medical use but also prompt some countries to loosen their medical marijuana restrictions.
Given the prospect of loosening regulations and increased legalization, cannabis stocks are set to soar in 2021. Investors could capitalize on the marijuana legalization boom through the following ETFs:
This is the first and world’s largest ETF focusing on the global cannabis/marijuana industry. It tracks the Prime Alternative Harvest Index, designed to measure the performance of companies within the cannabis ecosystem, benefiting from global medicinal and recreational cannabis legalization initiatives. The fund holds 33 securities in its basket with American firms making up 82.1% of the portfolio. The ETF has AUM of $993 million and trades in a solid volume of around 2.1 million shares. It charges 75 basis points in annual fees and has gained 15.6% in a month.
This is a new entrant in the marijuana space, having accumulated $145.2 million in just four months since debut. It is an actively managed ETF with dedicated cannabis exposure focusing exclusively on U.S. companies, including multi-state operators. The product holds 32 securities in its basket and charges 74 bps in annual fees. The fund trades in an average daily volume of 213,000 shares and has gained 14.4% in a month (read: Top Sector ETFs of Record-Setting Last Week).
YOLO is an actively managed ETF with a dedicated cannabis investment mandate domiciled in the United States. It seeks long-term capital appreciation by investing in both domestic and foreign cannabis equity securities. The fund holds a basket of 38 stocks with American firms making up for half of the portfolio, followed by 32.7% share in Canada. It has gathered $129.1 million in its asset base and charges 75 bps in annual fees. The product trades in an average daily volume of 227,000 shares and has added 17.8% in the same time frame (read: Cannabis ETF Hits New 52-Week High).
The Cannabis ETF
This ETF offers investors exposure to a basket of stocks that are expected to benefit from the growth of hemp and legal marijuana industries. Holding 30 stocks in the basket, Canadian firms make up for 65.9% share while the United States takes around 29.3% of assets. The fund has amassed about $44.2 million in AUM and trades in a good volume of about 109,000 shares per day, on average. It charges 70 bps in annual fees and is up 15.4% in a month.
Global X Cannabis ETF
This ETF seeks to invest in companies across the cannabis industry and tracks the Cannabis Index. It holds 18 stocks in its basket with Canadian firms accounting for 77.7% of assets while the United States takes 11.2% share. The product has accumulated $39.1 million in its asset base and trades in an average daily volume of 117,000 shares. Expense ratio comes in at 0.50%. POTX has surged 12.5% in a month.
With AUM of $20 million, CNBS is actively managed and invests 80% of its assets in securities of companies with 50% or more of their revenues from the cannabis and hemp ecosystem. The fund holds 24 securities and charges 75 bps in annual fees. It trades in an average daily volume of 43,000 shares and has risen 19.5% in a one-month period (read: Top ETF of November & Its Best Stocks).
This is also an actively managed ETF that seeks to invest in approximately 20 to 50 of the top companies with exposure to the broad cannabis industry based on Cambria’s determination as to their exposure to the industry. It holds 35 stocks in its basket with American firms making up for half of the portfolio and Canada taking 33.8% share. The fund has $18.4 million in AUM and an average trading volume of 23,000 shares. It charges 42 bps in annual fees and has risen 13.6% in the same time frame.
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Cannabis ETFs Set to Soar in 2021 on More U.S. Legalization
The cannabis stocks have been on a smooth ride post election buoyed by legalization hopes in more U.S. states and will continue to shine heading into the next year. With the start of the transition to Joe Biden’s presidency, markets are highly optimistic that the incoming administration will speed up the legalization of marijuana at the federal level, thereby providing a boost to the U.S. cannabis industry.
The successful ballot initiatives in five states — New Jersey, Arizona, South Dakota, Montana and Mississippi — last month broadened the potential market for legal cannabis sales, indicating wider acceptance of marijuana throughout the United States. Voters in New Jersey, Arizona, Montana and South Dakota approved legalizing sales of marijuana for adults. South Dakota also approved sales for its medical use, as did Mississippi.
According to industry tracker BDSA, the expansion of sales to adults alone represents a nearly 20% increase in the potential U.S. market for legal cannabis. As of now, 36 states have legalized medical cannabis use while 15 states and the District of Columbia have legalized cannabis for adult recreational use.
With increasing adoption and more legalization optimism, most analysts upgraded their growth outlook for the industry. Cowen projects the legal marijuana market to grow to $34 billion by 2025, up from an earlier forecast of $31 billion. Morningstar estimates that annual U.S. cannabis sales will reach $70 billion for the adult-use segment and $15 billion for medical (read: Why Cannabis Stocks & ETFs Are Soaring).
Additionally, the U.S. House of Representatives, early this month, passed a bill — the MORE Act — to decriminalize cannabis at the national level for the first time. The bill would remove cannabis from the list of federally controlled substances and erase certain federal convictions. However, the final approval is pending from the Republican majority Senate, which is not expected anytime soon.
Further, the United Nations commission voted to remove marijuana for medical use from the category of dangerous drugs. The historic move will not only pave the way to for marijuana research and medical use but also prompt some countries to loosen their medical marijuana restrictions.
Given the prospect of loosening regulations and increased legalization, cannabis stocks are set to soar in 2021. Investors could capitalize on the marijuana legalization boom through the following ETFs:
ETFMG Alternative Harvest ETF (MJ - Free Report)
This is the first and world’s largest ETF focusing on the global cannabis/marijuana industry. It tracks the Prime Alternative Harvest Index, designed to measure the performance of companies within the cannabis ecosystem, benefiting from global medicinal and recreational cannabis legalization initiatives. The fund holds 33 securities in its basket with American firms making up 82.1% of the portfolio. The ETF has AUM of $993 million and trades in a solid volume of around 2.1 million shares. It charges 75 basis points in annual fees and has gained 15.6% in a month.
AdvisorShares Pure US Cannabis ETF (MSOS - Free Report)
This is a new entrant in the marijuana space, having accumulated $145.2 million in just four months since debut. It is an actively managed ETF with dedicated cannabis exposure focusing exclusively on U.S. companies, including multi-state operators. The product holds 32 securities in its basket and charges 74 bps in annual fees. The fund trades in an average daily volume of 213,000 shares and has gained 14.4% in a month (read: Top Sector ETFs of Record-Setting Last Week).
AdvisorShares Pure Cannabis ETF (YOLO - Free Report)
YOLO is an actively managed ETF with a dedicated cannabis investment mandate domiciled in the United States. It seeks long-term capital appreciation by investing in both domestic and foreign cannabis equity securities. The fund holds a basket of 38 stocks with American firms making up for half of the portfolio, followed by 32.7% share in Canada. It has gathered $129.1 million in its asset base and charges 75 bps in annual fees. The product trades in an average daily volume of 227,000 shares and has added 17.8% in the same time frame (read: Cannabis ETF Hits New 52-Week High).
The Cannabis ETF
This ETF offers investors exposure to a basket of stocks that are expected to benefit from the growth of hemp and legal marijuana industries. Holding 30 stocks in the basket, Canadian firms make up for 65.9% share while the United States takes around 29.3% of assets. The fund has amassed about $44.2 million in AUM and trades in a good volume of about 109,000 shares per day, on average. It charges 70 bps in annual fees and is up 15.4% in a month.
Global X Cannabis ETF
This ETF seeks to invest in companies across the cannabis industry and tracks the Cannabis Index. It holds 18 stocks in its basket with Canadian firms accounting for 77.7% of assets while the United States takes 11.2% share. The product has accumulated $39.1 million in its asset base and trades in an average daily volume of 117,000 shares. Expense ratio comes in at 0.50%. POTX has surged 12.5% in a month.
Amplify Seymour Cannabis ETF (CNBS - Free Report)
With AUM of $20 million, CNBS is actively managed and invests 80% of its assets in securities of companies with 50% or more of their revenues from the cannabis and hemp ecosystem. The fund holds 24 securities and charges 75 bps in annual fees. It trades in an average daily volume of 43,000 shares and has risen 19.5% in a one-month period (read: Top ETF of November & Its Best Stocks).
Cambria Cannabis ETF (TOKE - Free Report)
This is also an actively managed ETF that seeks to invest in approximately 20 to 50 of the top companies with exposure to the broad cannabis industry based on Cambria’s determination as to their exposure to the industry. It holds 35 stocks in its basket with American firms making up for half of the portfolio and Canada taking 33.8% share. The fund has $18.4 million in AUM and an average trading volume of 23,000 shares. It charges 42 bps in annual fees and has risen 13.6% in the same time frame.
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Zacks’ free Fund Newsletter will brief you on top news and analysis, as well as top-performing ETFs, each week. Get it free >>