Investors Ought To Be Careful With This "Green" ETF

The green revolution is upon us – and I’m not talking about renewable energy. Canadian cannabis stocks have been hot commodities in recent years.

While overall sentiment for the cannabis sector has materially worsened, there are still some who believe the best is yet to come for these high-growth stocks. In this article, I’m going to discuss the Horizons Medical Marijuana Life Sciences ETF (TSX:HMMJ) which tracks this sector in a broad, diversified way.

The HMMJ ETF has sunk in accordance with the aforementioned sentiment shift in this sector. Growth expectations have not panned out broadly for most large cannabis players, and many Canadian investors have simply taken their losses and run.

A number of headwinds not related to the COVID-19 pandemic are hurting the sector broadly. These include a supply glut, an extremely slow rollout of government cannabis stores, and severe restrictions on branding and advertising, few reasons exist for investors to won this stock right now.

Demand could indeed pick up in the post-COVID world, and we could see a rebound of exuberance in this sector should a full-bore bull market once again take hold.

That said, there remains too much volatility in the sector for me to justify a buy recommendation anytime soon. I would caution all investor types to be careful with this sector in general, and therefore this ETF.

Invest wisely, my friends.