My premise for selecting the ETFMG Alternative Harvest ETF (MJ) as my Top Pick for 2021 was simple: I was extremely bullish on marijuana stocks this year, explains Chris Preston, editor of Cabot Wealth.
Despite an encouraging upturn the last nine months of 2020, the North American Marijuana Index was still trading at less than half its January 2018 apex. And momentum in the cannabis industry hadn’t slowed down a bit — far from it, in fact.
Retail sales of medical and recreational cannabis in the U.S. topped $17.5 billion in 2020, a 46% improvement from 2019, and are expected to reach $46 billion by 2025, according to the 2021 Marijuana Business Factbook.
With a new state legalizing marijuana use in some form seemingly every month (Alabama was the latest to do so, legalizing medical cannabis use last month), those projections may turn out to be modest. With that accelerating growth as the backdrop, marijuana stocks have continued their recovery.
The MJ fund is up 43% year to date even after a precipitous drop-off from as high as $33 a share in early February (it’s now down to $20). The fund has been building a solid-looking and increasingly-tightening base between $19 and $23 for more than three months.
This bodes well for another strong upwards breakout in the second of the year. From a fundamental and technical perspective, marijuana stocks look quite strong. At this point, there appears to be no stopping the trend toward full legalization in the U.S.
Thus, I’m just as bullish on the Alternative Harvest ETF now as I was entering the year — even after a 43% rise. With the fund trading at exactly half its 2018 peak and the climate for marijuana sales improving almost daily, this looks like a prime buying opportunity. That 43% run-up could look rather modest a year from now.
