Horizons Emerging Marijuana Growers ETF HMJR - 2018 Q2 UpdatHorizons Emerging Marijuana Growers ETF HMJR - 2018 Q2 Update Jul. 24, 2018 9:21 AM ET | About: Horizons Emerging Marijuana Growers Index ETFA (HZEMF), Includes: ABCCF, ACBFF, ACNNF, APHQF, BHHKF, BLEVF, CGC, CNGGF, CRCPF, CRON, DJACF, EMMBF, HDRPF, HMLSF, HMPPF, HRVOF, HYYDF, ICCLF, IVITF, LHSIF, LIBFF, MGCLF, MJ, MPXEF, MQPXF, MRPHF, MRRCF, MYMSF, NWKRF, PUFXF, SARSD, SPLIF, SPRWF, TGIFF, THCBF, TRSSF, UMBBF, VRNDF, WDDMF Cornerstone Investments Cornerstone Investments Long only, special situations, medium-term horizon (8,788 followers) Summary HMJR underperformed major indexes with 23% loss in 2018 so far. First quarterly rebalancing completed on June 29. 8 new names added to the ETF while 4 was removed. We prefer HMMJ over HMJR due to the higher risk associated with small-cap cannabis companies given the nascent nature of the sector. One of the most popular ways for investors to participate in the marijuana sector is through a diversified ETF. Besides the highly popular Horizons Marijuana Life Sciences ETF (OTC:HMLSF) (HMMJ.TO), Horizons launched its second marijuana-focused ETF in February 2018, The Emerging Marijuana Growers ETF (OTCPK:HZEMF) (HMJR.TO). The fund has accumulated an AUM of only about C$12 million as investors prefer to stick with the larger fund. Fundamentally, we think the cannabis space will see increased pressure on the small growers who will suffer from a combination of being in the low-margin cultivation business and disadvantages of their small sizes and resources. We prefer to stick with the large-caps in the first year of legalization and believe a basket approach to small growers are inherently riskier and could yield less-desirable returns. However, it is always beneficial to have a junior growers-focused ETF as an option for investors looking for an expanded arsenal. Since we discussed this ETF along with other ETFs on the market in our comprehensive guide "Which Marijuana ETF Is Best For You?", the ETF has evolved through rebalancing and new additions. In this article, we will discuss the changes being made to this ETF and implications for investors. Overview The fund has performed less than satisfactory since its inception in February 2018 as investors embraced for a steep loss of 23% as of June 29, 2018, compared to a smaller loss of 5% at HMMJ in 2018 year-to-date. The lacking performance was initially predicted by us in our article "5 Predictions For The Cannabis Industry" where we highlighted the less favorable outlook for the small growers as a whole. Individual names will outperform but we see funds like HMJR to have a difficult time outperforming large-cap funds such as HMMJ and Alternative Harvest ETF (MJ). Holdings Update The Junior Growers ETF has higher turnover compared to HMMJ due to the nature of its holdings which are smaller in size and subject to higher trading volatility. The most recent rebalancing for HMJR was done on June 29, 2018, when the ETF kicked out the following stocks: Canada House Wellness Marapharm PUF Ventures Hydropothecary The first three deletions were due to the steep losses suffered by these stocks and they have since fallen below the minimum market cap requirement. Hydropothecary, on the hand, has outperformed and graduated to join HMMJ. On the other hand, the followings stocks are added to the index. We have written on several of the names as part of our Discover Cannabis Series that focuses on introducing new cannabis stocks to investors (links below). We also wanted to point out the fact that the ETF is investing in stocks with U.S. exposure such as Liberty Health. Other ETFs such as Redwood's Marijuana Opportunities Fund have expressed reservation towards companies with U.S. exposure but that is not the case with Horizon. Heritage Cannabis House Supreme (see our recent article here) Invictus MD (see our recent article here) Newstrike Liberty Health (see our recent article here) Matica Enterprises Friday Night THC Biomed Name Ticker Jan-18 Jun-18 Chg Cann Group Ltd (OTCPK:CNGGF) 8.15% 7.86% (0.3%) SUPREME CANNABIS CO INC THE NEW (OTCPK:SPRWF) -- 7.75% n.a. Terrascend Corp (OTC:TRSSF) 7.80% 7.63% (0.2%) Auscann Group Holdings Ltd (OTCPK:ACNNF) 7.59% 6.97% (0.6%) NEWSTRIKE RESOURCES LTD. (OTCPK:NWKRF) 5.66% 5.7% LIBERTY HEALTH SCIENCES INC. (OTCQX:LHSIF) 5.34% 5.3% Mpx Bioceutical Corp (OTCQB:MPXEF) 7.38% 5.18% (2.2%) Abcann Global Corp (OTCQB:ABCCF) 5.12% 5.11% (0.0%) Maricann Group Inc (OTCQB:MRRCF) 6.52% 4.04% (2.5%) Icc Labs Inc (OTC:ICCLF) 2.26% 3.41% 1.2% Weedmd Inc (OTCPK:WDDMF) 5.34% 3.28% (2.1%) Hiku Brands Co Ltd (OTCPK:DJACF) 4.45% 3.17% (1.3%) Emblem Corp (OTCPK:EMMBF) 3.26% 2.79% (0.5%) Invictus MD (OTCPK:IVITF) 2.65% 2.7% Harvest One Cannabis Inc (OTC:HRVOF) 2.20% 2.56% 0.4% Liberty Leaf Holdings (OTCQB:LIBFF) 1.52% 2.54% 1.0% Friday Night (OTCQB:TGIFF) 2.40% 2.4% Benchmark Botanics Inc (OTCPK:BHHKF) 4.51% 2.38% (2.1%) Nutritional High International (OTCQB:SPLIF) 2.86% 2.25% (0.6%) THC Biomed (OTCQB:THCBF) 2.23% 2.2% Delta 9 Cannabis Inc (OTC:VRNDF) 2.05% 2.19% 0.1% Valens Groworks Corp (OTC:MYMSF) 4.44% 1.77% (2.7%) Hempco Food And Fiber Inc (OTC:HMPPF) 1.83% 1.72% (0.1%) MGC Pharmaceuticals Ltd (OTCPK:MGCLF) 2.40% 1.39% (1.0%) Hydroponic Co Ltd (OTCPK:HDRPF) 2.12% 1.36% (0.8%) Beleave Inc (OTCQX:BLEVF) 2.49% 1.34% (1.2%) Cresco Pharma Ltd (OTC:CRCPF) 2.45% 1.28% (1.2%) Matica (OTCPK:MQPXF) 1.24% 1.2% Indiva Ltd (RMKXD) 1.20% 1.01% (0.2%) Heritage Cannabis (OTC:UMBBF) -- 0.89% n.a. Hydropothecary Corp (OTCPK:HYYDF) 5.56% -- n.a. PUF Ventures (OTCPK:PUFXF) 2.85% -- n.a. Marapharm Ventures Inc (OTCQX:MRPHF) 1.94% -- n.a. Canada House Wellness Group Inc (OTC:SARSD) 1.64% -- n.a. Australian Dollar -- 0.05% n.a. ` Key Takeaway The 2018 Q2 rebalancing expanded the list of holdings for the ETF and highlighted the complementary nature of HMMJ and HMJR. As Hydropothecary continued to appreciate and graduate from TSX-Venture to the TSX, Horizon also moved the stock to the main fund in order to reflect the enhanced profile of the stock. We think investors should view the two ETFs as two very different options within the cannabis space that have distinct objectives and risks associated with it. We think ultimately investors need to pick their choice based on your return and risk objectives. Our recommendation for investors is to stick with the Horizon Marijuana Life Sciences ETF (HMMJ.TO) if you are just looking for general exposure to the cannabis space. HMMJ is highly concentrated with the top 5 holdings account for more than half of the fund and three quarters from the top 10 holdings. However, HMMJ includes all the large-cap names such as Canopy (CGC), Aurora (OTCQX:ACBFF), Aphria (OTCQB:APHQF), Cronos (CRON) and others. For a detailed analysis and update on HMMJ, see our recent article here. For HMJR, the topic of this article, we think it is subject to a higher risk at this stage of the legalization process and stock selection is critical in the small-cap space and requires skills and commitment from the fund manager, which is not suitable for a passive ETF. We have previously written on two actively-managed ETFs that focus on the marijuana sector which might be more suitable for investors looking for active management in the sector. The last point we will make is that HMJR trades on the Aequitas NEO Exchange which might limit access for some investors. Additional Resources We publish a widely-read Weekly Cannabis Report which is your best way to stay informed on the cannabis sector. We also encourage you to check out our Marijuana ETF Guide if you are considering investing in a marijuana ETF. Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article. Editor's Note: This article covers one or more stocks trading at less than $1 per share and/or with less than a $100 million market cap. Please be aware of the risks associated with these stocks. Like this article 358 people have HZ