Top Ways to Trade the New Cannabis Boom

Oct 07, 2022
Cannabis Industry And Investments Exploding In Profits Concept

Cannabis stocks are getting fired up.

All after President Biden lit a fuse, taking executive action to change U.S. policy on the drug, pardoning all prior federal offenses of simple cannabis possession.

Biden also asked federal officials to start a review process of how marijuana is “scheduled”, or classified, under federal law. Presently it falls under the same classification as heroin and LSD and in a higher classification than fentanyl and methamphetamine, as noted by Reuters.

“Today represents action from the Administration that we have been waiting for – an acknowledgement that cannabis prohibition has failed and that too many lives have been significantly impacted as a result,” David Culver, vice president of govt. relations Canopy, said, as quoted by CNBC.

In addition, we have to consider that more Americans support legalization.

According to Gallup, “More than twice as many Americans think that marijuana has a positive impact on its consumers and society at large than say the same about alcohol, according to a new Gallup poll,” reported Marijuana Moment,  “And perhaps more revealing, people who have actually used cannabis are far more likely to tout its positive impacts compared to just a small fraction of alcohol drinkers who feel the same way about their drug of choice.”

While investors can always buy into pot stocks, like Canopy Growth (CGC), Tilray (TLRY), Flora Growth (FLGC), or even cannabis dividend stocks, like Innovative Industrial Properties (IIPR) and AFC Gamma (AFCG), ETFs offer greater diversification at less cost.

Some of the top ones include:

ETFMG Alternative Harvest ETF (MJ)

With an expense ratio of 0.75%, the MJ ETF tracks the Prime Alternative Harvest Index, designed to measure the performance of companies within the cannabis ecosystem benefitting from global medicinal and recreational cannabis legalization initiatives.  Some of its top holdings include Canopy Growth, Cronos Group, Aurora Cannabis, and OrganiGram Holdings.

Global X Cannabis ETF (POTX) 

With an expense ratio of 0.50%, the ETF seeks to invest in companies across the cannabis industry. This includes companies involved in the legal production, growth and distribution of cannabis and industrial hemp, as well as those involved in providing financial services to the cannabis industry, pharmaceutical applications of cannabis, cannabidiol (i.e., CBD), or other related uses.  Some of its top holdings include Canopy Growth, HEXO Corp., and AFC Gamma.

Advisor Shares Pure US Cannabis (MSOS)

With an expense ratio of 0.73%, the ETF is the first actively managed U.S.-listed ETF with dedicated cannabis exposure focusing exclusively on U.S. companies, including multi-state operators. The portfolio manager allocates across an investable universe of U.S. companies spanning a variety of cannabis-related businesses.  Some of its top holdings include Green Thumb Industries, Curaleaf Holdings, Cresco Labs, Jushi Holdings, and GrowGeneration Corp.