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5 Top Performing Stocks of Marijuana ETF

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The cannabis-related ETFMG Alternative Harvest ETF MJ topped the list of the best performing ETFs of January, with impressive returns of about 41%. It also attracted $100.1 million in capital in the first month of 2019.

The surge was driven by renewed appeal for riskier assets and Trump's $867 billion Farm bill, legalizing cannabis products derived from hemp in America, including products containing cannabidiol (CBD). Additionally, a string of strong earnings and upbeat guidance from the pot companies added to the strength (read: What Makes Marijuana ETF the Best Performer in January?).

Canadian legalization for recreational marijuana continued to spread optimism in the space and pave the way for widespread legality. Recreational marijuana is expected to be legal soon for adults over the age of 21 years in New York while the European nation of Luxembourg in late November announced that marijuana would soon be legalized for recreational use by adult residents. All these developments have spurred a large number of deal activities, including mergers and acquisitions in the industry.

In particular, a number of alcoholic beverage companies are investing or partnering with cannabis producers. Among the latest deal, Aurora Cannabis agreed to buy Whistler Medical Marijuana Corp. in a stock deal valued at up to C$175 million ($131.8 million). Canopy Growth CGC plans to invest up to $150 million in New York to target the emerging market for cannabis products derived from hemp and CannTrust CNTTF plans to list its shares on the New York Stock Exchange. Meanwhile, marlboro cigarette maker Altria Group (MO - Free Report) is mulling over an acquisition of Canadian cannabis firm Cronos Group CRON.

As a result, the pot industry is emerging and poised for rapid growth in the years ahead. Per an analyst at Cowen, the U.S. legal cannabis industry is expected to reach $80 billion in sales by 2030, surpassing the carbonated soft drink market in 2017. An analyst at Haywood Securities foresees exponential growth in cannabis stocks with the U.S. cannabis market expected to be worth between $15.9 million and $21.7 billion by the year 2022 (read: Top ETF Trends for 2019).

Let’s take a closer look at the fundamentals of MJ.

MJ in Focus

This is the first and only ETF targeting the 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 38 securities in its basket with higher concentration on the top firms. Canadian firms make up 61% of the portfolio, while American firms comprise 29%. The ETF has AUM of $875.4 million and trades in a solid volume of around 887,000 shares. It charges 75 bps in annual fees.

Though most of the stocks in the fund’s portfolio delivered strong returns, a few were the real stars. Below we have highlighted those five best-performing stocks in the ETF with their respective positions in the fund’s basket:

Best Performing Stocks of MJ

Cronos Group Inc. (CRON): This company is engaged in investment in firms that are licensed to produce and sell medical marijuana. It has gained about 89% this month. Cronos Group currently has a Zacks Rank #5 (Strong Sell) and VGM Score of F. The stock occupies the top position in the fund’s portfolio, making up for 17.3% share.

Canopy Growth (CGC): This cannabis company offers dry cannabis and oil products primarily under the Tweed and Bedrocan brands. Canopy Growth takes the second position in the fund’s basket with 9% allocation. It also delivered incredible returns of 79% in January. The stock has a Zacks Rank #3 (Hold) and VGM Score of F (read: Why Marijuana ETF is on a High in 2019).

CannTrust Holdings Inc. (CNTTF): This company produces and distributes pharmaceutical grade medical cannabis products in Canada. The stock has surged 52.5% this month and takes the eight spot in the basket at 3.9%. CannTrust Holdings has a Zacks Rank #3 and VGM Score of F.

GW Pharmaceuticals PLC GWPH: This biopharmaceutical company is focused on discovering, developing and commercializing therapeutics from its proprietary cannabinoid product platform in a broad range of disease areas. The stock has surged about 49.6% this month. It currently carries a Zacks Rank #3 and has a VGM Score of F. GWPH occupies the tenth spot in the fund’s basket with 3.4% of the total assets.

Aphria Inc. APHA: This produces, supplies and sells medical cannabis primarily in Canada. The stock takes the eleventh spot in the fund’s basket with 2.7% of the assets. It has gained 39.2% in January.

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