Cannabis ETFs Outperform in January

The cannabis industry has been performing well this year after the US Drug Enforcement Administration (“DEA”) started reviewing the potential reclassification of cannabis from Schedule I to Schedule III. Many ETFs in the space have been surging.

Amplify U.S. Alternative Harvest ETF MJUS stole the show, gaining 35.9%. It is followed by gains of 35.8% for Roundhill Cannabis ETF WEED, 34.9% for AdvisorShares Pure US Cannabis ETF MSOS, 28.3% for Subversive Cannabis ETF LGLZ and 22.5% for AdvisorShares Pure Cannabis ETF YOLO. The solid trading is likely to continue at least in the near term or should legalization happen.

This development, initiated by a recommendation from the Department of Health and Human Services (HHS), could potentially expand the market for marijuana, which is a multibillion-dollar industry in the United States and a cash crop in many newly legalized states (read: Cannabis ETFs: What's Behind the Latest Surge).

A Schedule III classification could ease the banking restrictions, allowing businesses to have more straightforward access to banking services and attract more investors. The reclassification could alleviate some of the tax burdens and help shift public perception, further legitimizing the medical cannabis industry and potentially paving the way for broader acceptance and use of marijuana as a therapeutic agent.

Additionally, a shift in the classification could provide momentum for more states to consider medical or recreational legalization, as it would signal a change in the federal government's stance on the drug's potential risks and benefits. Nearly 40 states in the United States have already legalized marijuana in various capacities.

Moving marijuana to Schedule III would provide clearer regulatory guidelines for businesses, potentially leading to more consistent product quality and safety standards across the industry.

Additionally, a combination of factors such as strong financial performance, strategic market expansions, and the emergence of innovative market strategies and new players is fueling growth in the sector. Firms such as Canopy Growth Corp. and Tilray Brands are actively expanding their product offerings and entering new market segments, like cannabis-infused beverages.

Cannabis is now legal in some form in 39 states, reflecting a nationwide shift toward legalization. The global legal cannabis market is set for substantial growth, with sales projected to reach $61 billion by 2026.

ETFs to Tap

Amplify U.S. Alternative Harvest ETF (MJUS)

Amplify U.S. Alternative Harvest ETF is an actively managed ETF that seeks long-term growth of capital by primarily investing in securities of companies engaged in the Cannabis Business in the United States as generally represented in the Prime U.S. Alternative Harvest Index. It holds 19 stocks in its basket with a heavy concentration of the five firms.

Amplify U.S. Alternative Harvest ETF has amassed $151.1 million in its asset base and charges 75 bps in annual fees. It trades in a volume of 31,000 shares a day (read: Cannabis ETFs Spike on Marijuana Classification Review).

Roundhill Cannabis ETF (WEED)

Roundhill Cannabis ETF is designed to offer concentrated exposure to the largest U.S. cannabis companies. The fund may invest in various cannabis-related companies, including cannabis producers and distributors, cannabis-related technology companies and additional cannabis-related ancillary businesses. It offers precise exposure to five leading U.S. MSOs.

Roundhill Cannabis ETF has gathered $4.1 million in its asset base so far. It charges 40 bps in annual fees and trades in 6,000 shares a day on average.

AdvisorShares Pure US Cannabis ETF (MSOS)

AdvisorShares Pure US Cannabis ETF is the first actively managed U.S.-listed ETF with dedicated cannabis exposure focusing exclusively on U.S. companies, including MSOs. It holds 23 securities in its basket with a double-digit concentration on the top four firms.

AdvisorShares Pure US Cannabis ETF has amassed $863.1 million in its asset base while trading in an average daily volume of $5.5 million shares. It charges 83 bps in annual fees.

Subversive Cannabis ETF (LGLZ)

Subversive Cannabis ETF is an actively managed fund that invests in companies that will thrive as the legal marijuana industry expands. It holds four stocks in its basket and charges 75 bps in annual fees (read: (see: all the Marijuana ETFs here).

Subversive Cannabis ETF has managed assets worth $0.6 million and trades in a volume of 600 shares a day on average.

AdvisorShares Pure Cannabis ETF (YOLO)

AdvisorShares Pure Cannabis ETF is an actively managed fund with a dedicated cannabis investment mandate domiciled in the United States. YOLO seeks long-term capital appreciation by investing in domestic and foreign cannabis equity securities. AdvisorShares Pure Cannabis ETF holds a basket of 23 stocks, with American firms making up 68.1% of the portfolio, followed by Canadian firms with 28.4% share.

AdvisorShares Pure Cannabis ETF has gathered $46.5 million in its asset base and charges 1.03% in annual fees. YOLO trades in an average daily volume of 61,000 shares.

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AdvisorShares Pure Cannabis ETF (YOLO): ETF Research Reports

AdvisorShares Pure US Cannabis ETF (MSOS): ETF Research Reports

Amplify US Alternative Harvest ETF (MJUS): ETF Research Reports

Roundhill Cannabis ETF (WEED): ETF Research Reports

Subversive Cannabis ETF (LGLZ): ETF Research Reports

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Zacks Investment Research

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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