Marijuana ETF Joins Billion Dollar Club

ETFMG Alternative Harvest ETF (SNX:MJ) — the first and only pure ETF targeting the cannabis/marijuana industry — has been surging on easing rules and regulations on the once highly guarded drug, marijuana, for recreational and medical usage. The fund has now accumulated billion dollars in AUM since its inception in less than 14 months (read: ETF Investing 2019: Best Ideas & Trends).

Inside The Popularity

The popularity is rising since Canada has legalized recreational cannabis and become the second country in the world to do so on a national level.

Additionally, a number of states in United States also joined the race of marijuana legalization. Congress, the White House and U.S. regulators have also softened their stance on the drug’s legalization. Michigan became the 10th state to legalize recreational cannabis use while Utah and Missouri became the 31st and 32nd states, respectively, to legalize marijuana for medical use. Recreational marijuana is expected to be legal soon for adults over the age of 21 years in New York, while the European nation of Luxembourg in late November also announced that marijuana would soon be legalized for recreational use by adult residents.

Further, the FDA approved the first non-synthetic cannabis derived medicine, EPIDIOLEX, used to treat rare forms of childhood epilepsy and Trump passed the Farm bill legalizing cannabis products derived from hemp in America, including products containing cannabidiol (CBD). All these developments have injected strong optimism into the emerging marijuana industry.

The tremendous success of the pot industry is showing no sign of slowdown as a number of alcoholic beverage companies are producing huge opportunities by investing or partnering with cannabis producers (read: Pot Stocks are on a High: Play These Marijuana ETFs).

Per an analyst at Cowen, the U.S. legal cannabis industry is expected to reach $80 billion in sales by 2030, surpassing the carbonated soft drink market in 2017. An analyst at Haywood Securities foresees exponential growth in cannabis stocks with the U.S. cannabis market expected to be worth between $15.9 million and $21.7 billion by the year 2022.

MJ in Focus

It tracks the Prime Alternative Harvest Index, designed to measure the performance of companies within the cannabis ecosystem, benefiting from global medicinal and recreational cannabis legalization initiatives. The fund holds 38 securities in its basket with higher concentration on the top firm — Cronos Group Inc. (NASDAQ:CRON) — with 18.6% allocation. Canopy Growth (NYSE:CGC) and Aurora Cannabis (TO:ACB) take the next two spots with 8.7% and 7.7%, respectively, while other firms hold no more than 5.61% of assets (read: 5 Top Performing Stocks of Marijuana ETF).

Cronos has surged 121% so far this year buoyed by the M&A news involving tobacco giant Altria (NYSE:MO) . Canopy Growth has gained 85% while Aurora Cannabis is up 62% so far this year.

Canadian firms make up 61.9% of the portfolio, while American firms comprise 24.2%. The ETF trades in a solid average daily volume of around 940,000 shares and charges 75 bps in annual fees. The marijuana ETF has soared 38.9% so far this year (read: What Makes Marijuana ETF the Best Performer in January?).

Want key ETF info delivered straight to your inbox?

Zacks’ free Fund Newsletter will brief you on top news and analysis, as well as top-performing ETFs, each week. Get it free >>