In this article, we discuss 10 cannabis ETFs to explore. If you want to skip our detailed discussion on the cannabis industry, head directly to Navigating Regulatory Changes: 5 Cannabis ETFs To Explore.
In September last year, shares of marijuana firms fell after rising initially, following a US Senate Committee’s vote to pass a bill that would allow legitimate cannabis-related businesses to use banking services, as reported by Reuters. The Senate Banking Committee’s bipartisan vote supported the Secure and Fair Enforcement Regulation Banking Act, also referred to as SAFER Banking Act, which offers protection to banks that provide financial services to legal cannabis firms. After the Senate vote, a number of US-listed cannabis companies witnessed a rise in their shares, however most eventually declined. Canopy Growth Corporation (NASDAQ:CGC), Aurora Cannabis Inc. (NASDAQ:ACB), Cronos Group Inc. (NASDAQ:CRON), and SNDL Inc. (NASDAQ:SNDL) dropped, while Curaleaf Holdings, Inc. (OTC:CURLF) closed higher and Tilray Brands, Inc. (NASDAQ:TLRY) did not see any change. A few cannabis-linked ETFs saw their gains drop as well. While marijuana may be legal for recreational or medical purposes in around 40 US states, it continues to be illegal under federal law. This poses a barrier for legitimate cannabis companies looking to access financial services, resulting in them relying primarily on cash transactions, making them targets of criminal activity.
Commenting on the vote, Boris Jordan, billionaire founder of Curaleaf Holdings, Inc. (OTC:CURLF), said in an interview:
“We’ve worked very hard on this and it’s been four years of heavy lifting. To get it through the Senate banking committee is a major achievement. (If Congress passes the law) banks will be allowed to service companies doing business legally in state jurisdictions, and it is likely to also allow for credit card usage.”
The international cannabis market is anticipated to grow significantly in 2024, driven by new legal markets, and technological and product developments. According to The National Cannabis Industry Association, this growth poses both opportunities and obstacles, specifically in complying with complicated legal and regulatory frameworks. By 2027, retail cannabis sales have the potential to reach $53.5 billion, fueled by a faster growth rate in adult-use sales. States such as New York are in the process of finalizing program details for launching licensed cannabis programs, which is expected to add to this growth. Rising awareness among consumers could potentially popularize the trend toward customized cannabis products. Cannabis firms are likely to continue designing their products to meet individual needs and tastes. Pre-rolls, however, are forecasted to remain a top product in sales throughout 2024. As consumers explore the cannabis industry further, they are expected to develop an inclination towards artisanal flower and craft cannabis products, in spite of the continuous demand for economical and convenient alternatives. Canadian cannabis firms could see a comeback, influencing cross-border transactions and investment schemes. Germany’s influence as a significant market player also highlights the need to understand global financial regulations in the cannabis industry.
ATB Capital Markets predicted advancement in the Canadian cannabis industry, projecting a 10.9% year-over-year rise this year and a 9.2% compound annual growth rate from 2022 to 2031, at which point they forecast sales to reach $9.9 billion, an increase from $5.1 billion in 2023. High Tide Inc. (NASDAQ:HITI) and Nova Cannabis Inc. (OTC:NVACF) are top picks among retailers, with expected 2024 free cash flow yields of around 4% and 20%, respectively. Frederico Gomes, Institutional Research Director at ATB Capital Markets, identified Decibel Cannabis Company Inc. (OTC:DBCCF) as “among the Top 5 LPs in terms of market share”. The firm is promoted for its significant position in pre-rolls, growth potential, and attractive valuation. SNDL Inc. (NASDAQ:SNDL) is also noted for trading at a discount to net cash and investments.
The drive for legalization of recreational marijuana at the federal level normally amplifies during election years, and 2024 will not be an exception. At the state level, Pennsylvania and Florida are anticipated to enter the legal cannabis market, and Indiana may also move towards legalization following the launch of a ballot initiative for November. However, there is still doubt regarding the progress of the SAFER Banking Act on Capitol Hill, and its intended aims may be addressed through alternative means. Reclassifying cannabis under the Controlled Substances Act, possibly as a Schedule 3 substance following the Department of Health and Human Services’ suggestion, could mark a significant step forward. Energy in the cannabis industry could revive following the forecasted progress in 2024, bringing in investors and providing debt refinancing and equity-raising opportunities, which could potentially save struggling firms.
This article discusses some of the best cannabis ETFs that provide investors with access to stocks like Aurora Cannabis Inc. (NASDAQ:ACB), Constellation Brands, Inc. (NYSE:STZ), and Canopy Growth Corporation (NASDAQ:CGC). While the ETFs are trading at significant lows right now, it might be a good idea to invest in order to benefit from the growth potential in the cannabis industry once legalization takes place.
Our Methodology
We curated our list of the best cannabis ETFs by choosing consensus picks from multiple credible websites. We have mentioned the 5-year share price performance of each ETF as of March 22, 2024, ranking the list in ascending order of the share price. It is important to note, however, that not all ETFs have been trading for 5 years. We have also discussed the top holdings of the ETFs to offer better insight to potential investors.
Copyright: thommorrisphotography / 123RF Stock Photo
Navigating Regulatory Changes: Cannabis ETFs To Explore
10. Amplify Alternative Harvest ETF (NYSE:MJ)
5-Year Share Price Performance as of March 22: -88.86%
The Amplify Alternative Harvest ETF (NYSE:MJ) aims to mirror the performance of the Prime Alternative Harvest Index. It invests in companies involved in the cannabis industry, taking advantage of the global trend toward legalization for medicinal and recreational purposes. Launched on December 3, 2015, the ETF has net assets of $273.98 million as of March 22, 2024, and charges an expense ratio of 0.78%. The fund’s portfolio includes 30 stocks.
Tilray Brands, Inc. (NASDAQ:TLRY) is one of the top holdings of the Amplify Alternative Harvest ETF (NYSE:MJ). The company is involved in researching, growing, processing, and distributing medical cannabis products globally. On January 9, Tilray Brands, Inc. (NASDAQ:TLRY) announced results for the second quarter of fiscal year 2024. The firm reported a non-GAAP EPS of $0.00, beating estimates by $0.05, and a revenue of $194 million, missing estimates by $1.03 million.
According to Insider Monkey’s fourth quarter database, 13 hedge funds were bullish on Tilray Brands, Inc. (NASDAQ:TLRY), compared to 17 funds in the previous quarter.
Like Aurora Cannabis Inc. (NASDAQ:ACB), Constellation Brands, Inc. (NYSE:STZ), and Canopy Growth Corporation (NASDAQ:CGC), Tilray Brands, Inc. (NASDAQ:TLRY) is one of the best cannabis stocks.
9. Roundhill Cannabis ETF (BATS:WEED)
5-Year Share Price Performance as of March 22: -88.44%
The Roundhill Cannabis ETF (BATS:WEED) provides a focused approach to investing in the largest US cannabis companies. It is one of the best cannabis ETFs. Roundhill is optimistic about the sector’s growth potential due to legalization efforts in US states and globally. The ETF was launched on April 20, 2022, and has assets under management amounting to $6.6 million, with an expense ratio of 0.40%.
Curaleaf Holdings, Inc. (OTC:CURLF) is the largest holding of the Roundhill Cannabis ETF (BATS:WEED). Curaleaf Holdings, Inc. (OTC:CURLF) is a New York-based cannabis company with operations in both the domestic and international markets. On March 6, Curaleaf Holdings, Inc. (OTC:CURLF) reported a Q4 non-GAAP EPS of -$0.01 and a revenue of $345.3 million, outperforming Wall Street estimates by $0.05 and $7.67 million, respectively.
8. Horizons Marijuana Life Sciences Index ETF (TSE:HMMJ)
5-Year Share Price Performance as of March 22: -87.62%
The Horizons Marijuana Life Sciences Index ETF (TSE:HMMJ) aims to mirror, as closely as possible, the performance of the North American Marijuana Index. This index reflects the performance of a group of North American publicly listed companies heavily involved in the marijuana industry. The Horizons Marijuana Life Sciences Index ETF (TSE:HMMJ) ranks 8th on our list of the best cannabis ETFs. Launched on April 4, 2017, the ETF holds net assets totaling $88.91 million as of March 22, 2024. Its management expense ratio, as of June 30, 2023, is 0.95%.
Innovative Industrial Properties, Inc. (NYSE:IIPR) is the top holding of the Horizons Marijuana Life Sciences Index ETF (TSE:HMMJ). It is a Maryland corporation that manages specialized properties leased to experienced, state-licensed operators for their regulated cannabis facilities. On March 15, Innovative Industrial Properties, Inc. (NYSE:IIPR) declared a $1.82 per share quarterly dividend, in-line with previous. The dividend is payable on April 15 to shareholders on record as of March 28.
According to Insider Monkey’s fourth quarter database, 11 hedge funds were bullish on Innovative Industrial Properties, Inc. (NYSE:IIPR), in contrast to the preceding quarter when 16 funds had invested in the stock. Stuart J. Zimmer’s Zimmer Partners held the largest position in the firm, with 950,628 shares valued at $95.84 million.
7. AdvisorShares Pure Cannabis ETF (NYSE:YOLO)
5-Year Share Price Performance as of March 22: -84.59%
The AdvisorShares Pure Cannabis ETF (NYSE:YOLO) is the first actively managed ETF in the US focused on cannabis exposure. It ranks 7th on our list of the best cannabis ETFs. The fund invests in cannabis companies primarily in the US and Canada. AdvisorShares Pure Cannabis ETF (NYSE:YOLO) was launched on April 17, 2019. As of March 22, 2024, the fund’s assets under management total $49.57 million, and it includes 20 stocks in its portfolio. Its management fee is 0.31%.
Village Farms International, Inc. (NASDAQ:VFF) is one of the largest holdings of the AdvisorShares Pure Cannabis ETF (NYSE:YOLO). The company is involved in cultivating, marketing, and distributing greenhouse-grown tomatoes, bell peppers, and cucumbers across North America. It is divided into four parts – Produce, Cannabis-Canada, Cannabis-U.S., and Energy. On March 13, Village Farms International, Inc. (NASDAQ:VFF) announced a Q4 GAAP EPS of -$0.20, missing estimates by $0.18, and a revenue of $74.2 million, beating estimates by $3.27 million.
According to Insider Monkey’s fourth quarter database, 6 hedge funds were bullish on Village Farms International, Inc. (NASDAQ:VFF), compared to 4 funds in the last quarter. Israel Englander’s Millennium Management held a significant position in the company, with 124,673 shares worth $94,876.
In addition to Aurora Cannabis Inc. (NASDAQ:ACB), Constellation Brands, Inc. (NYSE:STZ), and Canopy Growth Corporation (NASDAQ:CGC), Village Farms International, Inc. (NASDAQ:VFF) is one of the best cannabis stocks to buy.
6. Advisorshares Msos 2x Daily ETF (NYSE:MSOX)
5-Year Share Price Performance as of March 22: -81.04%
The Advisorshares Msos 2x Daily ETF (NYSE:MSOX) is for experienced investors seeking exposure to the US cannabis sector. As an actively managed, leveraged ETF, Advisorshares Msos 2x Daily ETF (NYSE:MSOX) aims to provide enhanced cannabis exposure by mainly investing in swap agreements linked to the AdvisorShares Pure US Cannabis ETF (NYSE:MSOS). The ETF was launched on August 23, 2022. As of March 22, 2024, the fund manages assets worth $97.4 million. Its management fee is 0.85%.
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Disclosure: None. Navigating Regulatory Changes: 10 Cannabis ETFs To Explore is originally published on Insider Monkey.