Back to top

Image: Bigstock

Marijuana ETF Outperforms in Q1: 6 Stocks Leading the Rally

Read MoreHide Full Article

The cannabis-related ETFMG Alternative Harvest ETF (MJ - Free Report) topped the list of the best performing ETFs of first-quarter 2019, with impressive returns of nearly 50%. It also attracted $370.3 million in capital in the quarter.

The surge was driven by easing of rules and regulations on the once highly guarded drug — marijuana — for recreational and medical usage. In fact, the popularity has been rising since Canada legalized recreational cannabis last year and become the second country in the world to do so on a national level. Additionally, a number of states in United States have also joined the race of marijuana legalization. The White House, Congress and U.S. regulators have also softened their stance on the drug’s legalization. All these developments have injected strong optimism into the emerging marijuana industry, spurring deal activities (read: US Marijuana Market Warms Up to Merger Deals: ETFs in Focus).

As a number of alcoholic beverage companies are producing huge opportunities by investing or partnering with cannabis producers, the tremendous success of the pot industry is showing no signs of slowdown resulting in a strong rally in the marijuana ETF.

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

MJ in Focus

This is the first and only ETF focusing on 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 37 securities in its basket with higher concentration on the top firms. Canadian firms make up 62% of the portfolio, while American firms comprise 24.2%. The ETF has AUM of $1.2 billion and trades in a solid volume of around 945,000 shares. It charges 75 basis points in annual fees (read: Marijuana ETF Joins Billion Dollar Club).

Though most of the stocks in the fund’s portfolio delivered strong returns, a few were the real stars, soaring more than 60% in the first quarter. Below we have highlighted those six best-performing stocks in the ETF with their respective positions in the fund’s basket:

Best Performing Stocks of MJ

Cronos Group Inc. (CRON - Free Report) : This company is engaged in investment in firms that are licensed to produce and sell medical marijuana. It has gained about 95% in the first quarter. Cronos Group currently has a Zacks Rank #3 (Hold) and VGM Score of F. The stock occupies the third position in the fund’s portfolio, making up for 7.7% share.

Aurora Cannabis Inc. (ACB - Free Report) : This Canada-based company is engaged in the production and distribution of medical cannabis. Aurora Cannabis occupies the top position in the fund’s basket with 9.6% allocation. It also delivered incredible returns of 84.7% in the first quarter. The stock has a Zacks Rank #3 and VGM Score of F.

GW Pharmaceuticals PLC (GWPH - Free Report) : 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 71.4% this quarter. It currently carries a Zacks Rank #2 (Buy) and has a VGM Score of F. GWPH occupies the second spot in the fund’s basket with 8.4% of the total assets. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Aphria Inc. (APHA - Free Report) : This company produces, supplies and sells medical cannabis primarily in Canada. The stock takes ninth spot in the fund’s basket with 4% of the assets. It has gained 69.6% in the first quarter. Aphria has a Zacks Rank #3 and VGM Score of F.

Turning Point Brands Inc. (TPB - Free Report) : This company provides tobacco products consisting of moist snuff, loose leaf chewing tobacco, cigarette papers, make-your-own cigar wraps and cigar smoking tobacco, cigars and liquid and tobacco vapor. The stock has surged 66.5% this quarter and takes the 13th position in the basket at 2.3%. Turning Point has a Zacks Rank #4 and VGM Score of B.

Canopy Growth (CGC - Free Report) : This cannabis company offers dry cannabis and oil products primarily under the Tweed and Bedrocan brands. Canopy Growth takes the fourth position in the fund’s basket with 6.7% allocation. It has gained 66.3% in the first quarter. The stock has a Zacks Rank #3 and VGM Score of F (read: Tilray Earnings Impressive: More Reasons to Buy Marijuana ETFs).

Want key ETF info delivered straight to your inbox?

Zacks’ free Fund Newsletter will brief you on top news and analysis, as well as top-performing ETFs, each week. Get it free >>