After soaring to all-time highs last month, exchange traded funds tracking cannabis stocks are coming back down to test a key support line.
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And if they find support and stage a solid rebound off the 10-week moving average, that could set up a chance for investors to buy or add shares. But keep in mind: Market risk is high right now.
AdvisorShares Pure Cannabis (YOLO) is an actively managed ETF launched in April 2019. The $425.8 million fund invests in marijuana stocks across a wide range of industries, such as agriculture, biotech, pharmaceuticals, real estate and retail.
At the end of February, the U.S. accounted for about 61% of total assets. Canada weighed in at 29% and the U.K. 6%. Cash and a small position in Israel made up the rest.
Village Farms (VFF), GW Pharmaceuticals (GWPH), Aphria (APHA), Innovative Industrial Properties (IIPR) and Canopy Growth (CGC) were the top five holdings as of March 3.
Together, they represented nearly 52% of the 46-stock portfolio. Aphria leads with a 141% gain this year through Thursday’s close. The Canada-based company produces and sells medical cannabis and other products.
Drugmaker Soars, REIT Slips
GW Pharma, up 86%, is a U.K. biotech whose epilepsy treatment became the first cannabis-derived drug approved by the Food and Drug Administration. Jazz Pharmaceuticals‘ (JAZZ) $7.2 billion acquisition of GW is expected to close this quarter.
Village Farms, a greenhouse grower of vegetables and hemp, is up 39%. Canadian pot producer Canopy Growth holds a 25% year-to-date gain after falling 45% from its peak. Canopy this month launched Quatreau, a sparkling water with hemp-derived CBD, in the U.S.
Innovative Industrial Properties is nearly flat for 2021, after a 141% surge last year. The Utah-based real estate investment trust buys and leases industrial real estate used to grow medical marijuana.
Heading into Friday, YOLO was up 39% this year, on track to extend last year’s 42% gain. It charges a 0.75% expense ratio.
Global X Cannabis (POTX), up 56% this year, fell 34% in 2020. The $203.8 million fund launched in September 2019. It charges 0.50%.
Big In Canada
Canadian cannabis stocks accounted for 80% of the 25-stock portfolio as of Feb. 28. About 9% was in Britain, 7% in the U.S., and 4% in Australia. Consumer staples represented the biggest sector weight, 64%, with health care at 18%, industrials 9.5% and financials 5%. Less than 2% each was in consumer discretionary and information technology.
The top five holdings, about 40% of assets, included Aphria and GW Pharma. Tilray (TLRY), a Canada-based maker of cannabis-based drugs and oil products, has surged over 170% this year. It tumbled 52% last year. Tilray owns Manitoba Harvest, which sells hemp granola and other foods.
YOLO and POTX are extended from their most recent buy points, according to MarketSmith chart analysis. But both marijuana funds are testing their 10-week moving average lines.
Follow Nancy Gondo on Twitter at @IBD_NGondo
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