We haven’t stepped foot into the marijuana sector during the past couple of years, but a few a...
Cannabis? Buy American
09/09/2020 5:00 am EST
The second-quarter numbers for cannabis stocks have been giving a strong message: Buy American — that is U.S. multi-state operators, rather than the big Canadian cannabis firms, suggests growth stock expert Sean Brodrick, editor of Wealth Wave.
This will strike a bit strange to anyone who has been reading marijuana business headlines for the past couple years. Canadian cannabis firms tend to suck up all the oxygen. But the proof is in the numbers.
On average, the big U.S. cannabis firms that I favor saw revenues jump 27% quarter-over-quarter and 156% year-over-year. The Canadian firms, on the other hand, saw revenues, on average, actually drop 3% quarter-over-quarter and rise just 33% year-over-year. That’s some difference!
What’s more, a larger number of U.S. companies are making money, or closer to having earnings, when compared to their Canadian counterparts.
Meanwhile, the floundering Canadian companies qualify to list on the big U.S. exchanges like the Nasdaq and NYSE, while the better-performing U.S. companies can’t do that and are forced to list on the OTC. That’s because cannabis is legal in Canada, but it is not yet legal on the federal level in the United States.
Could that change with the next election? Possibly, depending on the outcome. While the Trump administration seems happy with the way things are, a Biden administration could shake things up.
In an interview with ABC News, Sen. Kamala Harris said a Biden administration would federally decriminalize cannabis. That would be a game-changer, though it stops short of legalization. In the meantime, here’s a “Buy American” investment idea for you — AdvisorShares Pure Cannabis ETF (YOLO).
Below is a performance chart since the March bottom. You can see that YOLO is trouncing the performance of both the S&P 500 and the ETFMG Alternative Harvest ETF (MJ).
ETFMG Alternative Harvest ETF is a more well-known fund and is much bigger than YOLO. MJ has $545 million in assets under management, while YOLO has just $60 million in assets. Both funds are pretty liquid.
So, why is YOLO leaving MJ in the dust? It’s the stocks each fund holds. YOLO allocates 50.1% of its assets to U.S.-based stocks and 34.2% to Canada. The rest is allocated between Britain (7.4%), Israel (0.4%) and cash (7.9%).
ETFMG Alternative Harvest ETF, on the other hand, allocated 45.3% of its assets to Canada and just 32.5% to the United States, with the rest going to Britain (15.3%), Sweden (3.5%) and Japan (2.5%)
In other words, YOLO concentrates on the U.S. The choice seems clear to me. How does it look to you? When it comes to pot stocks, I’d say “Buy American, and buy now."
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