TF Watch: Cannabis plays that will really get you fired up!

What seemed like an April Fool’s joke wasn’t. 

On March 31st, 2021 the Governor Andrew Cuomo signed legislation which legalized the recreational use of Marijuna by adults in New York State. 

Suddenly the local $1.8B cannabis industry was wide open for business – and not just for medical medical marijuana purposes. 

The industry is estimated to grow around 15% per year. 

It’s no wonder financial advisors have been searching for top trading cannabis stocks along with their ETFs. According to Trackstar data, we’ve been seeing three trending ETFs you should be aware of. 

Hilarious ticker names aside, the sector has had its share of volatility and skepticism. On Tuesday, the “SAFE Banking Act” passed through the House by 321-101 vote. But Wall Street grew skeptical regarding the Senate’s reception. 

The result: an acute sell off. 

The industry is not going away any time soon, regardless of regulations. If buying the dip is your thing, check out these ETFs: 

MJ: The ETFMG Alternative Harvest ETF (MJ) is one of the first “pure play” cannabis ETFs listed in the United States. In general, the ETF tracks a breadth of companies focused on the legal business of marketing, growing and selling cannabis merchandise and products for recreational and medical use. 

Since marijuana is a state-by-state legal issue and technically illegal under U.S. federal law, many of the companies in the fund are based in Canada. There are a couple companies in the index which focus on fertilizer and tobacco as well.

YOLO: This ETF looks at long-term capital appreciation by adding foreign and domestic cannabis based equities to its index. The weight of the index favors large-cap equities specifically in the United States and Canada. The fund is heavily weighted to large-cap equities primarily in the U.S. and Canada. What’s more, the holdings focus on a pangea of mico-sectors of the cannabis market including biotech, pharmaceuticals, agriculture to name a few.  

TOKE: Cambria Cannabis ETF looks at companies which have a broader exposure to the cannabis industry. 80% of the fund is invested specifically in cannabis companies. The other 20% has exposure to cannabis adjacent companies that fall under mico, small and mid-cap stocks. Some of the top holdings include: APHA, SMG, IIPR, STZ, WEED and VFF. 

Takeaways:

-Changing regulations on the state and federal levels mean there is growth in the cannabis sector. 

-Not all cannabis ETFs are the same- some are a pure play and others look at companies that are “sector adjacent.” 

-The next big thing in the cannabis industry is the “SAFE Banking Act.” If the US Senate gets on board, this could be a game changer. 

Questions from your clients: 

-Is investing in pot illegal? 

-Give me an idea of growth opportunities- is this a long or short term play? 

-If “SAFE Banking Act” doesn’t pass will that impact growth opportunities for the stock? 

-Are these ticker symbols for real? 

-How big could the sector grow if there is a global push to legalize? 

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