A sector that has seen traction and speculation at the same time, cannabis industry has made significant progress at a global scale in recent years. Cannabis was once a topic of taboo, which has now become the most discussed subjects, globally, at present. Medical cannabis, which is also known as medicinal marijuana, has seen a sharp surge going from a criminalised drug to a multibillion-dollar global boom within a short span.
Canada was the first industrialised country that legalised recreational cannabis in October 2018. After one year of Canada’s venture of legalising recreational cannabis/marijuana, Cannabis 2.0 rolled out that marked the inclusion of cannabis infused edibles, beverages, vape pens and extracts. Today, it is used in at least twenty countries for either improving disease symptoms or treatment of different medical conditions with the African country, Malawi being the latest to permit its use.
Canada's policy of cannabis legalisation has been broadly acknowledged and considered as a victory, as in just the first month after Cannabis2.0 legalisation, $8 billion was spawned from cannabis-related investment. It is anticipated that global cannabis market will reach nearly $22 billion by 2022.
In Australia also, medicinal cannabis has become legal, leaving shareholders with the advantage of availing the abundant opportunities available in the market. Furthermore, there has been a relative inelastic demand from patients as well as recreational consumers for cannabis. Consequently, demand for this product, in turn, the entire cannabis industry is anticipated to grow dramatically in future.
Let’s have a look at some ways to invest in cannabis stocks.
- ASX-Listed Cannabis Stocks: One approach to invest in cannabis stocks is to purchase the shares of cannabis companies listed on the Australian Securities Exchange.
- Global cannabis stocks- Another way is to invest in some of the largest players in the global cannabis market listed on stock exchanges in economies such as the United States or Canada.
- Cannabis Exchange Traded Funds (ETFs)- These often follow an index of stocks. Nearly six cannabis ETFs are listed in the United States.
Exchange Traded Funds (ETFs)
When it comes to investment portfolio diversification, exchange-traded funds or ETFs become a popular choice for large and small investors alike. ETFs can be defined as a basket of securities that holds various underlying assets and typically follow and imitate an underlying index which means ETFs trade on a stock exchange just like a regular stock. They go through price fluctuations as they are bought and sold and offer low expense ratios with fewer broker commissions (relative to stocks). There are several ways & strategies to invest in ETFs.
For more information, please read Points To Consider While Investing In ETFs?
What are different types of ETFs?
Investors park their funds in ETFs primarily to generate income, and secondarily to offset risk in their portfolio, expedite speculation and price movements. Various types of ETFs are outlined below -
First Cannabis ETF Launched in Europe
Medical cannabis market that was initially established in Canada has now entered Europe. In January 2020, Purpose Investments Inc., a Canadian asset management company that manages more than C$8 billion of assets in Canada including the Marijuana Opportunities Fund worth C$34.2 million, launched the Medical Cannabis & Wellness UCITS ETF, via HANetf, an independent European ETF provider supported by well-known investor Steve Cohen’s Point72 Ventures, reflecting Purpose’s 1st move in the European market and first of its kind for European investors.
Listed in Germany, the ETF is made available to investors in countries including Ireland, UK and Italy.
This Cannabis fund provides European investors an exclusive exposure to the international medical cannabis market including the cannabinoid (CBD) wellness sector.
It was further reported that this fund would cost 80 cents or 80 basis points for every 100 Euros committed, in addition would invests in auxiliary services that assist public enterprises with legal operations in the medical cannabis, hemp and CBD markets.
Launch of this truly innovative ETF is a significant move to offer investors, seeking investment opportunity in the cannabis industry, an exposure to a new product through a pre-screened cannabis securities basket and in a regulated UCITS ETF.
Investors can easily access an investment vehicle able to substantially decrease their legal risk against direct investment in single cannabis securities. Other benefits for investors include –
- A great way of diversification of investment portfolio, no need to do research each individual security.
- May help to endure the short-term volatility of individual securities, potentially making for a lower risk, longer-term investment.
HANetf’s Medical Cannabis & Wellness ETF Underwent Quarterly Rebalancing with 4 New Companies Included
In a quarterly index rebalancing late-February 2020, the Medical Cannabis & Wellness UCITS ETF (CBDX), in a meticulous multi-tiered screening way ensuring entities engaged in the cannabis market for adult use are identified and removed, added four new constituents to the index with a combined weight of 13.6%.
CBDX tracks Medical Cannabis & Wellness Equity Index (rules-based) from Solactive. The index entails firms that are engaged in legal business operations and are publicly listed, including nine thematic sub-sectors in the hemp, cannabidiol (CBD), and medical cannabis industries.
The 4 new companies added includes two ancillary services providers; Akerna Corp and Grow Generation Corporation, one CBD and Wellness company; The Alkaline Water Company and one Medical Cannabis company; Tetra Bio-Pharma.
The addition of new companies reflects the growing interest in the cannabis industry. The cannabis sector, which is still in the infancy stages of a multi-year growth phase, is expected to register strong growth in upcoming years, with investment vehicles like cannabis ETFs gaining strong traction, backed by innovation and new discoveries in the sector.