Four ETFs to Invest in Marijuana

04/22/2019 5:00 am EST

Focus: CANNABIS

Timothy Lutts

Publisher, Cabot Heritage Corporation

Marijuana stocks are hot, and so are marijuana index funds and ETFs, notes Timothy Lutts, a leading expert in the cannabis sector and editor of Cabot Marijuana Investor.

The hottest stocks have doubled since the December bottom. But as every experienced investor knows, what goes up often comes down, and the hottest stocks often turn into anvils when the music stops.

So how do you participate in the growth of America’s fastest-growing industry without risking losing your shirt? One popular way is to invest in marijuana ETFs that own a whole bunch of the best stocks in the industry. That way, you avoid the occasional train wreck, while still participating in the great growth of the sector.

Below are four marijuana index funds and ETFs worth researching, from largest to smallest.

ETFMG Alternative Harvest ETF (MJ)

With $1.2 billion in assets, Alternative Harvest has focused on the marijuana sector since December 2017, but not too intently; the fund also holds stocks of companies with at least some connection to the cannabis industry—or that might have a connection to the industry in the future, like tobacco companies.

Year-to-date, the fund is up 44.5% as I write, so it’s definitely invested in fast-moving marijuana stocks.

Top holdings recently included Aurora (ACB), GW Pharmaceuticals (GWPH), Cronos (CRON), Canopy Growth (CGC) and Tilray (TLRY).

Horizons Marijuana Life Sciences (HMMJ)

Horizons, with almost $1 billion in assets, has many of the same holdings as Alternative Harvest; in fact, its top five holdings are Canopy Growth, Aurora, Tilray, GW Pharmaceuticals and Cronos — exactly the same as Alternative, but in a different order.

A lot of that is determined simply by market capitalization; funds like these don’t buy tiny stocks, they buy the biggest. But Horizons has fewer of the “remotely connected to the industry” stocks than Alternative, and the result can be seen in its performance, up 53.6% year-to-date.

Purpose Marijuana Opportunities Fund (MJJ)

With $42 million in assets, Purpose invests heavily in Canadian companies (though 20% of assets are in the U.S.) and takes an active interest in growth and valuation factors (as I do). Thus, it doesn’t simply own the five highest-valued stocks, like Alternative and Horizons do.

Instead, the top five holdings at Purpose are Organigram (OGRMF), Aurora, HEXO Corp. (HEXO), Green Thumb Industries (GTBIF) and Harvest Health and Recreation (HRVSF).

Those are among my favorite marijuana stocks, today, too. This marijuana exchange-traded fund is up 58.9% year-to-date, which is darn good.

Horizons Emerging Marijuana (HMJR)

As its name suggests, the Horizons Emerging Marijuana ETF concentrates on the smaller companies in the cannabis space, which is great if you’re looking for the hottest performance. But with only $12 million in assets, the fund is small, so it’s not so efficient. It’s been open since February 2018, and as I write, it’s up 38.9% year-to-date, lagging the big boys.

Top five holdings recently were Supreme Cannabis (SPRWF), Harvest Health and Recreation, Emerald Health Therapeutics (EMHTF), Aleafia Health (ALEAF) and Liberty Health Sciences (LHSIF).

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