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Say Hello to the Cannabis ETF, a Trend-Setter, or Fad?

Jon Brown Jon Brown, Stockhouse
0 Comments| July 16, 2019


With the addition of a new cannabis focused exchange traded fund on the New York Stock exchange, it is likely just a matter of time before major players like Vanguard Group and Fidelity Investments begin their own cannabis ETFs and mutual funds.

The Cannabis ETF (NYSE: THCX) launched Tuesday, July 9th by Innovation Shares LLC (a sponsor of unique thematic ETFs) and will focus on companies in the legal marijuana, CBD and hemp industries with the aim to be the sole passively managed pure-play ETF solution for cannabis investing.

(Image via THCX. Click to enlarge.)

Cannabis is one of the fastest growing investment themes out there currently. Looking to reap the benefit of a global market that is expected to reach $130 billion (USD) in a decade, the Cannabis ETF holds 35 stocks, including some of the world's largest Canadian marijuana companies by market cap:

  • Canopy Growth Corp. (TSX:WEED, NYSE:CGC)
  • Aurora Cannabis Inc. (TSX / NYSE: ACB)
  • Cronos Group Inc. (TSX / NASDAQ: CRON)
  • HEXO Corp. (TSX: HEXO)
  • Tilray Inc. (NASDAQ: TLRY)
  • GW Pharma (NASDAQ: GWPH)

It also includes operators in the U.S. such as Charlotte's Web Holdings Inc. and real estate investment trust Innovative Industrial Properties.

In a news release, Innovation Shares’ Managing Director, Matt Markiewicz noted that investors entering the cannabis space have demanded a diversified, liquid and cost-efficient vehicle to invest in the ‘green rush’:

“As a pure-play cannabis ETF, THCX focuses on companies in the legal marijuana, CBD and hemp industries – the portfolio does not rely on alcohol or tobacco stocks to provide exposure to this burgeoning global growth story.”

He added that with several regulatory catalysts on the horizon in the US and abroad, the current cannabis environment presents an exciting opportunity for investors.

“One area which has witnessed explosive growth since the signing of last year's U.S. Farm Bill is the hemp-derived CBD industry. Several of the companies in the portfolio are actively participating in this CBD boom by cultivating hemp, providing extraction services or by using CBD for applications in the pharmaceutical, health and consumer wellness markets.”

Via THCX’s fact sheet:

"THCX was constructed to make investing in cannabis easier by helping investors get exposure to a pure-play basket of stocks that are expected to benefit from the burgeoning hemp and legal marijuana industries. Although cannabis itself has been around for centuries, the industry’s near-term growth trajectory is similar to several disruptive and now familiar growth stories witnessed over the past three decades such as broadband and cable television."


(Image via THCX. Click to enlarge.)

Innovation Shares stated that the ETF will re-balance monthly, unlike many other ETFs, which rebalance quarterly. THCX could have a better grasp of the quickly evolving cannabis capital market while also stabilizing the longer-term volatility that has also dogged the market. The belief is that there is a generational investment opportunity up for grabs here, targeting those who have held off on buying specific stocks. Innovation Shares also boasts an AI-powered natural language processing algorithm used to help identify sentiment around themes and relevant stocks.

So far, this is the lowest cost US-listed cannabis ETF yet, at 70 basis points management fee (the average ETF expense ratio is 0.44% according to the Wall Street Journal). There are two others, AdvisorShares Pure Cannabis ETF (NYSE: YOLO) and ETFMG Alternative Harvest ETF (NYSE: MJ) who also track the cannabis sector and trade in the US.


FULL DISCLOSURE: HEXO Corp. is a client of Stockhouse Publishing.



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