The Canadian cannabis sector got off to a hot start in 2019. However, many of the top producers have suffered major setbacks since the early spring.
Companies like Canopy Growth (TSX:WEED) and Aurora Cannabis (TSX: ACB) have been forced to push back profitability projections. In the case of Canopy Growth, it forecast that it may not reach profitability for three to five years.
Cannabis investors have the option to invest broadly in this sector with the Horizons Marijuana Life Sciences ETF (TSX:HMMJ). Shares of the ETF have plunged 32% in 2019 as of close on December 17. This came after a 19% drop in 2018. It launched in April 2017. The ETF rewarded investors who jumped in early, but it has since been a struggle.
Some of the top holdings in the ETF include Canopy Growth, Aurora Cannabis, Cronos Group (TSX:CRON), and Aphria (TSX:APHA). There are some positives that investors can look forward to in the cannabis industry as we look ahead to 2020.
First, Cannabis 2.0 has brought on the legalization of vape pens, edibles, and other products that were left behind with the first phase of legalization. This is expected to boost sales volumes for top producers into the New Year.
There is also the potential of legalization in the United States. Several top Democratic presidential candidates, including Bernie Sanders and Elizabeth Warren, have vowed to pursue federal legalization. On the domestic front, many top producers are also ramping up production. The supply shortage will transfer into a glut in the first half of the next decade.
The Horizons Marijuana Life Sciences ETF is worth a shot for investors who are not risk-averse, but targeting individual cannabis stocks is the higher-reward bet that makes more sense considering the current bout of volatility.
