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Will Cannabis ETFs be on a High Again?

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The marijuana industry is among the very few areas at the current moment that is taking giant strides. Growing efforts for legalization, both for medical and recreational usages, are taking this commodity to a new high.

Legal pot is on the verge of spreading around the country this Election Day, as voters would cast ballots that could abolish marijuana banning in two U.S. states and expand the reach to medical cannabis in two others, per USA today.

Michigan and North Dakota will vote for the legalization of recreational marijuana on Nov 6 and if approved will join the other nine – Washington, Oregon, Nevada, California, Colorado, Alaska, Vermont, Maine and Massachusetts.

Also, if successful in Michigan and North Dakota ballots would push up the percentage of the U.S. population living in a state with recreational marijuana to 25%.Voters in Utah and Missouri will appear for ballots to give a verdict on legalizing marijuana in their states for the first time.

Most of the U.S. states have already incorporated some form of legal pot, be it recreational or medical. As many as 29 states plus D.C. approve of medical marijuana use by large numbers of people. Alabama and Mississippi have also approved its use, but by only a meager number of extremely sick people.

Latest Polling Data

Though pot remains entirely illegal at the federal level, around 66% of Americans are in favor of legal recreational cannabis, according to an October poll by Gallup, quoted on USA today.

According to the source, latest polling data reveal that Missouri has 65% chances of approval, followed by Michigan (59% approval rate), Utah (58% of approval rate) and North Dakota (39% approval).

Investors should note that in October, Canada became the first major world economy and the second country after Uruguay to legalize recreational marijuana. Medical use of marijuana has been legal in the country since 2001 (read: Canada Legalizes Marijuana: Stocks & ETF in Focus).

Recreational Marijuana Getting Higher Market Share

According to a report released by research firm ArcView Market Research and BDS analytics, the overall market share of the medical marijuana declined from 100% in 2013 to 71% in 2017 while recreational usage taking major share. By 2027, medical marijuana is expected to be only 33% of the overall market, per ArcView, as the rest will be dominated by recreational stuff.

Increase in Sales

If permitted, the latest legalization could finally generate more than $2 billion in total sales. “In 2018 in the United States, we project retail sales to reach about $7 billion,” per the founder of New Frontier Data. The founder now expects by 2025 that the sales figure to go up to about $25 billion.

ETFs in Focus

Such a hype brings marijuana ETF ETFMG Alternative Harvest ETF (MJ - Free Report) under the spotlight. After an amazing stretch over the past few months, marijuana ETF plunged in October as Canada’s legalization in mid-month was overbought. Profit booking probably made this once-soaring space dive in October (read: Top ETF Stories of October).

Demand for cannabis-infused beverages is also giving the space a boost. The fund is down 9.2% this year (as of Nov 2, 2018), has gained 20.6% in the past three months and has retreated 16.8% past month. If the spectrum of legalization broadens in the United States, marijuana ETF can get its lure back.

There is yet another ETF that has exposure to pot, namely Advisorshares Vice ETF (ACT - Free Report) . The fund has 23% exposure to cannabis-related, 4% to alcohol with cannabis and 9% to tobacco with cannabis exposure (read: Pot Stocks Are on a High: Play These Cannabis ETFs).

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