Best Marijuana ETFs for Q4 2022

Marijuana exchange-traded funds (ETFs) provide investors with exposure to the stocks of companies that engage in the cultivation, distribution and sale of marijuana and related products. Marijuana companies’ products include dried flowers, oils, seeds, edibles, and more.

Still banned as an illegal substance in many parts of the world, marijuana is gaining acceptance for medicinal and recreational use. Support for the pursuit of legalization is growing and cannabis is now a multi-billion dollar industry. The global legal marijuana market is expected to grow at a healthy pace compound annual growth rate (CAGR) by 25.5% until 2030. Marijuana ETFs are an easy way for investors to gain exposure to a diverse basket of marijuana stocks and profit from this growing industry.

Key points to remember

  • Marijuana stocks have significantly underperformed the broader US stock market over the past year.
  • The marijuana exchange-traded funds (ETFs) with the best one-year total returns are MJ, MSOS, and YOLO.
  • The main holdings of these funds are respectively ETF ETFMG Sit Ultra Short, GrowGeneration Corp. and AdvisorShares Pure US Cannabis ETF.

Four marijuana ETFs trade in the United States, excluding inverse and leveraged ETFs as well as funds under $50 million in assets under management (AUM). The marijuana sector, as measured by the Global Cannabis Stock Index, has significantly underperformed the broader US stock market over the past 12 months, with a year-over-year price change of -72.4% from to the S&P 500 one-year total return of -3.7% as of August 10, 2022. The best performing marijuana ETF, based on past year performance, is the ETFMG Alternative Harvest ETF (GM).

We take a look at the three best marijuana ETFs below. All figures below are as of August 11, 2022. In order to focus on the funds’ investment strategy, the top holdings listed for each ETF exclude cash holdings and holdings purchased with securities lending proceeds. , except in unusual cases, such as when the cash portion is exceptionally large.

  • One-year performance: -64.8%
  • Expense ratio: 0.75%
  • Annual dividend yield: 1.56%
  • Three-month average daily volume: 1,174,512
  • Assets under management: $424.7 million
  • Creation date: December 3, 2015
  • Issuer: ETFMG

MJ is the first ETF to focus on the global cannabis industry and tracks the Prime Alternative Harvest Index. The gauge tracks the performance of companies in the global cannabis industry that benefit from the growth, marketing and sale of medical and recreational cannabis products. Like other cannabis ETFs, investors should note that the fund’s large number of thinly traded stocks small cap stocks raises the question of whether there might be enough liquidity absorb cash flows without distorting prices. Since marijuana is still illegal under federal law in the United States, MJ’s portfolio is dominated by Canadian cannabis companies.

The fund’s three largest holdings are Tilray Brands Inc. (TLRY), a Canadian supplier of medical cannabis; and Cronos Group Inc. (CRON.TO), a Canadian cannabis research and technology company; and Canopy Growth Corp. (CGC), another Canadian producer of medical cannabis (and recreational cannabis in Canada).

  • One-year performance: -66.4%
  • Expense ratio: 0.73%
  • Annual dividend yield: N/A
  • Three-month average daily volume: 1,234,661
  • Assets under management: $642.7 million
  • Creation date: September 1, 2020
  • Issuer: AdvisorShares

MSOS is a actively managed fund which focuses on owning US cannabis companies, including multi-state operators (MSOs) that are involved in various parts of the industry. The ETF is looking for the long term capital appreciation. ETF portfolio companies must be registered with the United States Drug Enforcement Administration (DEA) to process marijuana for the purposes of legal research and development of cannabis or cannabinoid-related products. MSOS holdings can focus on areas such as real estate investment trusts (REITs), health, hydroponics and pharmaceuticals.

MSOS also uses swap contracts to provide exposure to the cannabis sector, which may increase volatility. The top three stocks in the fund are GrowGeneration Corp. (ROUGH), a retailer of hydroponic and organic specialty gardening products; Innovative Industrial Properties Inc. (IIRP), a REIT focused on the cannabis industry; and Ayr Wellness Inc. (AYR-A.CN), a manufacturer and retailer of branded cannabis products.

  • One-year performance: -68.9%
  • Expense ratio: 0.76%
  • Annual dividend yield: 0.22%
  • Three-month average daily volume: 64,148
  • Assets under management: $77.9 million
  • Creation date: April 17, 2019
  • Issuer: AdvisorShares

YOLO is an actively managed ETF that seeks long-term capital appreciation by investing in domestic and foreign cannabis stocks. It invests in small and mid capitalization global companies that derive at least 50% of their revenue from the marijuana and hemp industry. Like MSOS above, companies must be approved by the DEA to use marijuana for legal research and product development related to cannabis or cannabinoids.

YOLO is designed to take advantage of the long-term growth of the cannabis industry and may be ideal for a buy and keep wallet. It also allocates at least 25% of its portfolio to biotechnology, pharmaceutical and life science companies. The fund’s top three holdings are AdvisorShares Pure US Cannabis ETF (MSOS), described above; Village Farms International Inc. (VFF), a Canadian producer of tomatoes, peppers, cucumbers and cannabis; and Innovative Industrial Properties Inc.

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