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Cannabis ETFs Set to Soar on Passage of Legalization Bill

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Cannabis stocks are poised to surge further especially following the legislation passed by the House to legalize marijuana nationwide.

As such, investors should bet on the ETF targeting these stocks. ETFMG Alternative Harvest ETF (MJ - Free Report) , Global X Cannabis ETF , Cannabis ETF (THCX - Free Report) , Amplify Seymour Cannabis ETF (CNBS - Free Report) and AdvisorShares Pure Cannabis ETF (YOLO - Free Report) have been leading the way higher over the past month on legalization bets and will likely to continue to do so.

The House bill, called the Marijuana Opportunity Reinvestment and Expungement Act, or MORE Act, would remove marijuana from the list of banned controlled substances and establish a process to expunge prior cannabis convictions. It also will impose a federal tax on marijuana products  —a 5% excise tax for the first two years, increasing by 1% incrementally each year over the next three years.

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.

A slew of acquisitions announced in recent weeks 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:

ETFMG Alternative Harvest ETF (MJ - Free Report)

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 $722 million and trades in a solid volume of around 1.4 million shares. It charges 75 bps in annual fees.

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 $93 million in its asset base and trades in an average daily volume of 213,000 shares. The expense ratio of POTX comes in at 0.50%.

The Cannabis ETF (THCX - Free Report)

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 32 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 $63.3 million in AUM and trades in a good volume of about 53,000 shares per day, on average. It charges 75 bps in annual fees.

Amplify Seymour Cannabis ETF (CNBS - Free Report)

Amplify Seymour Cannabis ETF is an actively managed fund which, invests at least 80% of its assets in securities of companies with 50% or more of their revenues from the cannabis and hemp ecosystem. CNBS holds 35 securities in its basket, with each making up not more than 9% of assets. Amplify Seymour Cannabis ETF provides 48.9% exposure to American firms and 45.6% to Canadian firms.

Cultivation and retail is the top industry in the CNBS basket at 29%, while agricultural technology, real estate and investing & finance round off the next three spots with double-digit exposure each. With AUM of $74 million, Amplify Seymour Cannabis ETF charges 75 bps in annual fees and trades in an average daily volume of 57,000 shares.

AdvisorShares Pure Cannabis ETF (YOLO - Free Report)

AdvisorShares Pure Cannabis ETF is also an actively managed fund with a dedicated cannabis investment mandate domiciled in the United States. YOLO seeks long-term capital appreciation by investing in both domestic and foreign cannabis equity securities. AdvisorShares Pure Cannabis ETF holds a basket of 26 stocks with a double-digit exposure to the top three firms. American firms make up 61.4% of the portfolio, followed by a 28.7% share of the Canadian firms.

AdvisorShares Pure Cannabis ETF has gathered $148.2 million in its asset base and charges 76 bps in annual fees. YOLO trades in an average daily volume of 77,000 shares.

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