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Cannabis ETFs Soar Last Week

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Cannabis ETFs have topped the list of best performing ETFs last week on hopes of federal legalization vote. Global X Cannabis ETF and Cannabis Growth ETF were the biggest beneficiaries, climbing more than 19% each, followed by gains of 16.2% for The Cannabis ETF and 15.2% for ETFMG Alternative Harvest ETF (MJ - Free Report) .  

Congress is scheduled to vote this week on the Marijuana Opportunity, Reinvestment and Expungement act to federally legalize the drug. The bill would remove cannabis from the list of federally controlled substances. If passed, the bill would be sent to the Senate for approval before heading to President Joe Biden's desk for his signature (see: all the Marijuana ETFs here).

This will be the second time that Congress has voted on legalization. A similar bill passed the House in 2020 but was stalled in the Senate, and Wall Street analysts warn that a similar outcome could occur this time around. Overall, marijuana is legalized for recreational use in 18 states and is legalized for medical use in 38 states.

Given the rising number of countries decriminalizing and legalization, cannabis stocks are set to soar. Global cannabis sales are projected to reach more than $35 billion in 2022, reflecting a 22% increase from last year, according to BDSA’s most recent five-year rolling market forecast update. For 2026, U.S. cannabis sales are expected to reach $46 billion at a CAGR of 14% from 2021.

Additionally, a slew of acquisitions announced earlier last week added to the strength. Cresco Labs is set to acquire Columbia Care for $2 billion, while Aurora is in the process of buying TerraFarma in a $38 billion cash-and-stock deal (read: 5 ETF Areas Shining Bright as US Economy Looks Strong).

Let’s delve into each of the ETFs in detail below:

Global X Cannabis ETF

Global X Cannabis ETF seeks to invest in companies across the cannabis industry. This includes companies involved in the legal production, growth and distribution of cannabis and industrial hemp, as well as those involved in providing financial services to the cannabis industry, pharmaceutical applications of cannabis, cannabidiol, or other related uses, including extracts, derivatives or synthetic versions. Global X Cannabis ETF tracks the Cannabis Index and holds 24 stocks in its basket.

In terms of country exposure, Canada takes the largest share at 71.5%, followed by 19% in the United States. Global X Cannabis ETF has accumulated $82 million in its asset base and trades in an average daily volume of 182,000 shares. The expense ratio of POTX comes in at 0.51%.

Cannabis Growth ETF

Cannabis Growth ETF is one of the first to invest primarily in companies related to the cannabis industry. It is a specialty and actively managed portfolio focused on investing in the cannabis industry, providing potentially small-cap, aggressive growth exposure. Cannabis Growth ETF seeks to invest primarily in exchange-listed equity securities of companies located around the globe and engages exclusively in legal cannabis activities under applicable national and local laws, including U.S. federal and state law. It holds 22 stocks in its basket.

Cannabis Growth ETF has accumulated $3.4 million in its asset base while trading in an average volume of 1,000 shares. It charges 79 basis points (bps) in annual fees.

The Cannabis ETF

The Cannabis ETF offers investors exposure to a basket of stocks that are expected to benefit from the growth of the hemp and legal marijuana industries. It tracks the Innovation Labs Cannabis Index. Holding 29 stocks in the basket, Canadian firms make up for 43.2% share while the United States takes around 40.3% of assets (read: 5 Sector ETFs That Crushed the Market in Q1).

The Cannabis ETF has amassed about $57.7 million in AUM and trades in a good volume of about 44,000 shares per day, on average. It charges 95 bps in annual fees.

ETFMG Alternative Harvest ETF

ETFMG Alternative Harvest ETF is the first and world’s largest ETF focusing on the global cannabis/marijuana industry. MJ 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. ETFMG Alternative Harvest ETF holds 37 securities in its basket with a moderate concentration across top firms.

American firms account for 47.4% of the MJ portfolio, while Canadian firms make up for 37.7% share. ETFMG Alternative Harvest ETF has AUM of $675.3 million and trades in a solid volume of around 1.2 million shares. It charges 75 bps in annual fees.

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