Marijuana exchange-traded funds (ETFs) provide investors with exposure to equities of companies that engage in the cultivation, distribution, and sale of marijuana and related products. Products of marijuana companies include dried flowers, oils, seeds, edibles, and more.
Still prohibited as an illegal substance in many parts of the world, marijuana is gaining wider acceptance for both medicinal and recreational purposes. Support for continued legalization is growing, and cannabis is now a multibillion-dollar industry. Marijuana ETFs are a straightforward way for investors to gain exposure to a diversified basket of marijuana equities and profit from this growing industry.
Key Takeaways
- Marijuana equities have significantly underperformed the broader U.S. equity market over the past year.
- The marijuana exchange-traded funds (ETFs) with the best one-year trailing total returns are CNBS, YOLO, and THCX.
- The top holding of each of these funds is Tilray Inc., Innovative Industrial Properties Inc., and Village Farms International Inc., respectively.
Six marijuana ETFs trade in the United States, excluding inverse and leveraged ETFs as well as funds with less than $50 million in assets under management (AUM). The marijuana sector, as measured by the Global Cannabis Stock Index, has dramatically underperformed the broader U.S. stock market over the past 12 months, with a 1-year total return of 17.0% compared to the S&P 500’s 1-year trailing total return of 35.9% as of Nov. 8, 2021. The best-performing marijuana ETF, based on performance over the past year, is the Amplify Seymour Cannabis ETF (CNBS).
We examine the three best marijuana ETFs below. All numbers below are as of Nov. 5, 2021.
- Performance Over One-Year: 26.9%
- Expense Ratio: 0.75%
- Annual Dividend Yield: 0.59%
- Three-Month Average Daily Volume: 53,485
- Assets Under Management: $102.6 million
- Inception Date: July 23, 2019
- Issuer: Amplify Investments
CNBS is an actively managed ETF that provides exposure to the cannabis industry by investing at least 80% of its assets in securities of companies that derive 50% or more of their revenue from the cannabis and hemp ecosystem. The majority of the fund’s holdings operate within either the cultivation and retail or agricultural technology sectors of the cannabis market, though investing and finance companies also garner sizable representation. Most of its holdings are based in either the United States or Canada, but a portion of the portfolio is based in Ireland and a small fraction of it is based in Israel.
CNBS follows a blended strategy, investing in a mix of growth and value stocks of mostly mid-cap and small-cap companies. The fund’s top three holdings are Tilray Inc. (TLRY), a Canada-based provider of medical cannabis; class A shares of WM Technology Inc. (MAPS), a provider of software and technology solutions to the cannabis industry; and Canopy Growth Corp. (WEED:TSE), a Canada-based medical marijuana producer.
- Performance Over One-Year: 15.0%
- Expense Ratio: 0.75%
- Annual Dividend Yield: 0.25%
- Three-Month Average Daily Volume: 94,792
- Assets Under Management: $220.2 million
- Inception Date: April 17, 2019
- Issuer: AdvisorShares
YOLO is an actively managed ETF that seeks long-term capital appreciation by investing in both domestic and foreign cannabis equities. The fund is heavily weighted to mid-cap equities primarily in the United States and Canada. But it also provides exposure to companies based in the United Kingdom and a small fraction in Israel.
YOLO is designed to take advantage of the cannabis industry’s long-term growth and may be ideal for a buy-and-hold portfolio. The fund’s top three holdings are Innovative Industrial Properties Inc. (IIPR), a real estate investment trust (REIT) focused on the cannabis industry; Village Farms International Inc. (VFF:TSE), a Canada-based grower of tomatoes, bell peppers, cucumbers, and cannabis; and Tilray Inc.
- Performance Over One-Year: 13.7%
- Expense Ratio: 0.70%
- Annual Dividend Yield: 0.42%
- Three-Month Average Daily Volume: 46,414
- Assets Under Management: $101.4 million
- Inception Date: July 9, 2019
- Issuer: Mcivy Co. LLC
THCX tracks the Innovation Labs Cannabis Index, which consists of global companies engaged in the legal cannabis, hemp, or cannabidiol (CBD)-based pharmaceutical, consumer product, and wellness markets. The ETF was designed to provide a convenient way for investors to gain exposure to a basket of stocks expected to benefit from growth in the hemp and legal marijuana industries.
All of the fund’s holdings are based in the U.S. and Canada. THCX is heavily weighted to the pharmaceuticals and biotech sector, and it follows a blended strategy of investing in a mix of value and growth stocks. The fund’s top three holdings are Village Farms International; Organigram Holdings Inc. (OGI:TSE), a Canada-based manufacturer of medical cannabis products; and Cronos Group Inc. (CRON:TSE), a cannabis research, technology, and development company.
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