In the past, I’ve touched on a few reasons why I see the Horizons Marijuana Life Sciences ETF (TSX:HMMJ) downward trend continuing for the foreseeable future, however in this article, I’m going to discuss my thoughts on how this ETF could actually outperform in the next five to 10 years.
The HMMJ ETF is most well known for its global approach to the cannabis sector, with companies from all around the world held in this fund.
Of course, due to legalization in Canada, the vast majority of cannabis producers included in this ETF are based in Canada, and with the slide we’ve seen in valuations of late (down to earthbound levels), the HMMJ ETF has reflected this performance, though perhaps to a lesser degree than it would have, if it included only Canadian cannabis producers, as its other global holdings help contain a portion of the losses investors in most Canadian cannabis producers have seen over the past year.
One key driver I see that could take this ETF higher, with all that said, is new consolidation in the Canadian cannabis production space through bankruptcies and takeovers for pennies on the dollar.
There are too many small players in the market right now, and I view the future of the Canadian cannabis sector similar to telecommunications or banks- a handful or less of true “players” will exist, with perhaps some small niche producers around which won’t amount to much.
When this sort of depressed consolidation starts, I’d be interested in entertaining a long position in HMMJ, as this is the crucial step the Canadian sector needs to take before it can rise again.
Invest wisely, my friends.
