American investors are putting their money into an exchange-traded fund (ETF) that tracks the Canadian marijuana industry as the country moves toward legalization in October and a growing number of alcohol producers show interest in cannabis-infused drinks.
The US-listed US$436 million Alternative Harvest ETF, known by its ticker symbol “MJ,” has taken in US$22 million so far in August, putting it on track for the largest monthly inflow of investments since February of this year. That asset growth has been fuelled by a 35% rise in the fund’s price since August 14.
Marijuana stocks have been on the rise ahead of Canada’s pending legalization of recreational marijuana and cannabis products on October 17 and growing speculation that other industries such as alcohol and spirits will buy into the burgeoning industry. For example, Tilray Inc. (NASDAQ: TLRY), a Canadian medical marijuana company, has seen its share price more than tripled since it started trading on July 18.
A major boost for marijuana share prices came two weeks ago when alcohol giant Constellation Brands Inc. invested US$3.8 billion in Canadian marijuana producer Canopy Growth Corp. (TSE: WEED), the biggest deal to date in the recreational drug industry. Since the move was announced on August 15, the BI Canada Cannabis Competitive Peers index has gained more than 30%, including 3.7% in trading yesterday (Wednesday).
“This reinforces the interest among large consumer companies in partnering with cannabis producers,” said Bloomberg Intelligence analyst Kenneth Shea. “It also signifies the confidence that consumer companies have for the continued rise in consumer demand for legal cannabis-infused beverages in Canada, but also eventually in the US and in international markets.”
Last week, it was widely reported that the global alcohol giant Diageo Plc is meeting with several Canadian marijuana producers as it looks for a partner to help it make cannabis-infused beverages, raising market speculation over who that may be. Molson Coors Canada Inc. also announced a joint venture with Hydropothecary Corp. to develop non-alcoholic, cannabis-infused drinks.
However, while the US-listed MJ ETF is going strong, a Canada-listed counterpart is struggling. The US$703 billion Horizons Marijuana Life Sciences Index ETF, ticker symbol “HMMJ,” is currently seeing its biggest month of investor dollar outflows since it began trading in April 2017, with US$6.1 million leaving the fund this month alone.
The opinions provided in this article are those of the author and do not constitute investment advice. Readers should assume that the author and/or employees of Grizzle hold positions in the company or companies mentioned in the article. For more information, please see our Content Disclaimer.