Cannabis 2.0: Is This ETF Discounted?

Before the 2015 federal election in Canada, cannabis stocks were prepping for a run that would christen many new millionaires. However, recreational legalization has cast a shadow over many of the top producers.

Top companies like Aurora Cannabis and Canopy Growth have failed to achieve profitability in 2019. In both cases management have been forced to extend guidance.

The Horizons Marijuana Life Sciences ETF (TSX:HMMJ) seeks to track the top cannabis stocks in North America. Some of its top holdings include Aurora, Canopy, and Cronos Group, which rounds out the top three. Shares of the ETF have plunged 36% over the past three months.

Canada’s major parties are not focused on the cannabis issue this time around. The Conservatives, who opposed legalization in 2015 and prior, have vowed that they will avoid challenging the Liberals’ key legislative accomplishment if they win the election.

Companies are expected to get a jolt from “Cannabis 2.0”, which will see the legalization of edibles. These products will hit shelves before the New Year.

Canopy Growth has boasted that it has over 50 products ready for launch, which should give it a boost as it is not expected to hit profitability in three to five years, according to its own projections.

The Horizons Marijuana Life Sciences ETF last had an RSI of 19, putting it well into oversold territory. Cannabis stocks look broadly oversold right now, especially with the industry in such a young stage. I’m jumping on this ETF if it drops below the $10 mark.