Yesterday was the first day of trading for the U.S. ETF industry’s first pot-focused fund. The ETFMG Alternative Harvest ETF (MJX) was, up until the day after Christmas, focused on Latin American real estate companies and traded under the ticker LARE.
It now holds a portfolio of 30 stocks likely to benefit from increased research around the medical uses of marijuana and the broadening push to legalize its use for recreational and medical purposes.
The key here is that all of these companies operate legally. Although pot shops in the U.S. tend to make money hand over fist, they are not directly represented in this index, as their activities are not sanctioned at the federal level.
They can’t even use the federal banking system, making for some interesting scenarios when it comes to dealing with all the cash they’re pulling in. Much of the fund’s assets are invested in non-U.S. companies, but there is a surprising amount of pure-play companies.
The portfolio’s largest holdings include Cronos Group, with a weight of 6.23%; Canopy Growth, at 5.9%; GW Pharmaceuticals, at 5.5%; CannTrust Holdings, at 5.37%; and MedReleaf Corp., at 5.22%. Half of the fund’s assets are invested in the health care sector, with consumer staples weighted at 31% and materials at 9%. Canada, where marijuana is legal at the national level, has a 41% weighting in the index, while U.S. companies are weighted at 34% and U.K. companies at 9%.
Interestingly, the fund holds big tobacco names such as Imperial Brands, Philip Morris, Altria Group and British American Tobacco. Despite their size, those all rank in the bottom half of the index when it comes to their respective weights.
In fact, “Big Tobacco” has been eyeing the marijuana space for years, by all accounts, and there is significant synergy between the two industries, especially with the rise of e-cigarettes and vaping.
MJX comes with an expense ratio of 0.75% and lists on the NYSE Arca.
Contact Heather Bell at [email protected]