If you haven’t heard yet, the Democrats took control of the House of Representatives. Now, this has led to several state political parties endorsing marijuana initiatives that would soon face voters. Some Democrats have even published steps to legalize cannabis to end the federal prohibition on marijuana. Additionally, the market has seen some large companies invest in the space, like Constellation Brands (STZ) investing $4B in Canopy Growth Corp (CGC). That said, other companies may look for strategic partnerships and acquisitions. In turn, there could be an immense rate of growth in the space. Consequently, investors and traders have been trying to figure out ways to gain exposure to the industry. Well, one way to gain exposure to marijuana stocks is to consider marijuana exchange-traded funds (ETFs). Some are even looking for marijuana ETFs holding CGC stock since it’s one of the leaders in the space.
Exchange-Traded Funds (ETFs) Overview
Now, before we look at which marijuana ETFs hold CGC stock, let’s take a look at the intricacies of exchange-traded funds. An ETF trades just like a stock. You can buy and sell shares through your broker. However, an ETF holds a basket of stocks an tracks the performance of indices, commodities, bonds, or other asset classes. Think of ETFs as mutual funds, but they trade like common stock on an exchange, such as Nasdaq or NYSE.
The reason many traders and investors look to ETFs is the fact they provide diversification and exposure to a specific industry. For example, if you wanted to be long marijuana stocks due to a potential catalyst, it would be pretty hard to buy dozens of names…and it would eat at your capital. However, if you purchase shares of marijuana exchange-traded funds, it would be more efficient, while providing you with the exposure to cannabis stocks.
Moving on, let’s look at Canopy Growth Corp and why some may look for marijuana ETFs holding CGC stock.
Canopy Growth Stock
Canopy Growth has emerged as one of the leading companies in the cannabis industry, and investors and traders are taking note. If you recall, Constellation Brands invested $4B in Canopy Growth, which should be a key driver in its earnings. Canopy Growth is an early mover in the Canadian cannabis market with strong brand recognition.
With this capital injection, Canopy Growth could expand its operations and increase cannabis production, as well as distribution. Moreover, it could become one of the leaders in the marijuana beverage market. Additionally, the company has been engaging in acquisitions and strategic partnerships. For example, during the fourth quarter of 2018, CGC acquired Storz & Bickel (a company focused on cannabis consumption devices). It also announced strategic partnerships with 48North, MediPharm Labs, Battelle, and Brink’s.
Here’s a look at CGC’s performance on the hourly chart.
That said, investors and traders have been looking at CGC stock for opportunities. Now, what if you want to buy and hold CGC stock, but are afraid of company-specific news potentially driving the stock lower? Well, you can either hedge your CGC stock position or purchase ETFs, which provides diversification.
Marijuana ETFs Holding CGC Stock
If you’re looking for cannabis ETFs holding CGC stock, there are two funds that come to mind. First, there’s the ETFMG Alternative Harvest ETF (MJ) and Horizons Marijuana Life Sciences Index ETF (HMLSF). Keep in mind, HMLSF is traded on OTC Markets, as well as the Toronto Stock Exchange. Now, if you want to learn how to trade stocks listed on OTC Markets, you might want to learn from experienced traders because stocks listed on this exchange may be difficult to trade.
ETFMG Alternative Harvest ETF
Now, one of the most widely trade marijuana ETFs holding CGC stock is the ETFMG Alternative Harvest ETF (MJ). The ETF aims to provide investment results corresponding to the total return performance of the Prime Alternative Harvest Index, before fees and expenses. MJ may be appealing to U.S. traders and investors since CGC is traded on the New York Stock Exchange. Additionally, this marijuana ETF holding CGC stock provides exposure to global cannabis stocks.
MJ’s top 10 holdings include CGC stock, and allocates approximately 8% of its portfolio to the name. Keep in mind an ETF’s holdings are subject to change, and it could either decrease or increase its allocation in CGC.
Check out the hourly chart on MJ.
The chart looks pretty similar to that of CGC, right?
Well, since CGC stock is a leader in the cannabis industry, it could potentially move the entire sector, especially if there’s a positive catalyst.
Let’s move onto the next marijuana ETFs holding CGC stock.
Horizons Marijuana Life Sciences Index ETF
HMLSF trade on the OTC Markets, so if you’re looking to invest or trade this name, make sure you proceed with caution. This ETF aims to replicate the performance of the North American Marijuana Index, the fund’s underlying index. Now, HMLSF’s underlying index provides exposure to life sciences companies with operations in the cannabis industry.
HMLSF provides diversified exposure to the marijuana industry, unlike a single investment in a marijuana stock. That in mind, HMLSF could be an alternative to MJ.
The largest holding in HMLSF is CGC stock, with over 12% of the portfolio allocated to Canopy Growth. Some other notable marijuana stocks included in the ETF are Aurora Cannabis (ACB), Tilray Inc. (TLRY), and GW Pharmaceuticals (GWPH).
Final Words on Marijuana ETFs Holding CGC Stock
If you want exposure to CGC stock, but want to diversify your cannabis holdings, you might consider marijuana ETFs. However, keep in mind cannabis stocks are considered volatile, and are best left for traders who like to take on risk. If you’re able to remain disciplined, and spot patterns, marijuana ETFs holding CGC stock could prove to be lucrative. That said, MJ is best left for those who want a pure play in the cannabis industry. On the other hand, those who are experienced trading OTC-listed stocks and ETFs may opt for the Horizons Marijuana Life Sciences Index ETF. HMLSF provides exposure to life sciences companies with exposure to the cannabis industry. If you’re interested in trading cannabis stocks, and not marijuana ETFs, check out how you can do that here.