HoldingsCronos Group, Aurora Cannabis, Canopy Growth, and more
Managed byETF Management Group
Grass, pot, Mary Jane, weed–marijuana has a lot of slangy names that point to its controversial history.
But attitudes toward marijuana, whose scientific name is cannabis, are changing quickly, and its recreational use is becoming more acceptable. Nearly two thirds of Americans say use of marijuana should be legal, according to a 2017 Gallup poll. That’s up from 60% in 2016, and just 34% in 2002.
Nearly two thirds of Americans say use of marijuana should be legal, according to a 2017 Gallup poll.
Corporate Cannabis is hoping to capture the industry growth. Corporate Cannabis, which is the Stash nickname for ETFMG Alternative Harvest ETF (Ticker: MJ), an exchange-traded fund (ETF) that offers investors exposure to companies that are leading the way in the burgeoning marijuana industry.
Marijuana and the Law
While U.S. federal law still considers marijuana use and possession illegal, eight states and the District of Columbia have in recent years legalized cannabis for recreational use. And in January, California became the largest state in the U.S. to allow its residents to use marijuana for pleasure, with a market of nearly $4 billion in 2018, according to reports.
There are now 29 states that allow doctors to prescribe cannabis for medical purposes, which can include helping to alleviate nausea related to chemotherapy, and stimulation of appetite for people who are chronically ill, among other things. (On the international front, Canada may soon be the first developed nation to make recreational and medicinal marijuana use fully legal.)
Source: Third Way
And it all makes for big business. Total legal sales of cannabis in the U.S. were about $8 billion in 2017, and are expected to grow to $24.5 billion by 2021, according to the research group New Frontier.
What’s in the fund?
Corporate Cannabis tracks the Prime Alternative Harvest Index, which includes the stock of 30 public companies internationally that are “engaged in the legal cultivation of cannabis, or the legal production, marketing or distribution of cannabis products for medical or non-medical purposes,” according to the fund prospectus.
Although the majority of the companies in the fund are based in North America, according to Morningstar, the fund does not include any companies that grow or distribute marijuana in the U.S., due to the federal prohibition on cannabis. When the fund invests in cannabis businesses, the companies are located primarily in Canada, and derive at least 50% of their revenue from legal cultivation or production of cannabis, according to the prospectus.
The 30 companies in the fund include Cronos Group and Cannimed, both medical marijuana companies based in Canada, as well as the pharmaceutical firms Arena Pharmaceuticals and GW Pharmaceuticals.
Source: ETF. com
Corporate Cannabis also includes more traditional tobacco companies that aren’t currently actively involved in the cannabis space, but may one day stake a claim in legal marijuana, according to reports.
Those include U.S.-based tobacco companies Altria and Philip Morris, as well as Denmark’s Scandinavian Tobacco group, and China’s Huabao, among others.
Corporate Cannabis: Fund performance and other details
The fund, which is managed by ETF Managers Group, officially launched on December 26, 2017.
MJ was previously structured as a real estate fund called Tierra XP Latin America Real Estate ETF, according to the prospectus. Sam Masucci, the founder and chief executive officer of ETF Managers Group said in a press release at the time the fund launched, that MJ is about giving “investors exposure to new markets and doing our part to impact the continued evolution of the ETF industry by meeting the appetite of investor interest.”
Year to date, the share price of the fund has increased 16.36%, as of January 9, 2018, according to Morningstar.
By comparison, a similar fund, known as Vicex, which invests in so-called vice stocks including those of tobacco, beer, and gambling companies, had a year to date increase of 0.28% as of January 9, 2018, according to Morningstar.
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Corporate Cannabis (MJ) has a management fee of 0.75%, according to the fund prospectus. While that’s relatively low compared to some funds, it’s also higher than the average expense ratio for an ETF, which is 0.43%, according to ETFdb.com. Fees can reduce investment returns.
Risks and considerations
The companies held by the fund may be subject to heightened legal risk, as use and possession of marijuana is currently illegal under U.S. federal law, and under many state laws and international laws.
As such, cannabis companies and companies involved in selling cannabis products may have limited access to banks, and may never be allowed to sell their products entirely legally in the U.S., and in other countries where cannabis is also illegal, according to Morningstar and the fund’s prospectus. Companies that produce tobacco also face heightened regulatory controls.
Corporate Cannabis is considered a risky investment. Stash will send you an overexposure warning, urging you to diversify, if you invest more than $100 in Corporate Cannabis, and that amount represents more than 10% of your portfolio.
- You can invest in the legal cannabis industry on Stash.
- Corporate Cannabis allows you to invest in companies legally developing cannabis products for recreational and medicinal purposes
- This investment also includes the stocks of some big tobacco companies
*Stash does not endorse the illegal use of Narcotics.