The election of Democrat Joe Biden in November has breathed new life into cannabis stocks in North America. Top Democrats are pushing hard for federal legalization. Executives for cannabis firms like Canopy Growth and Tilray are optimistic about the possibility of legalization in the next 18 to 24 months.
However, investors will have to wait for the U.S. to pass through the battle over the huge stimulus bill first.
For those who want broader exposure to the cannabis market, you can snag the Horizons Marijuana Life Sciences ETF (TSX:HMMJ). This ETF seeks to replicate the performance of the North American Marijuana Index. Its top four holdings, all weighted at least 10% or more, are Aphria, Canopy Growth, Cronos Group, and Innovative Industrial Properties.
This ETF suffered three straight years of disappointing returns before cannabis’ comeback in late 2020 and early 2021. The ETF declined 19% in 2018, 33% in 2019, and 1.4% in 2020. Its performance has reflected the somewhat disappointing rollout for recreational legalization in Canada. The dismal retail landscape, exacerbated by porous provincial policy, allowed the black market to regain a foothold in the cannabis space.
Fortunately, the enormous U.S. market holds promise of redemption for Canada’s largest cannabis firms. Canopy Growth’s acquisition of Acreage Holdings could pay off in a big way if legalization arrives in the near term. It will have a big advantage in establishing an early footprint in the U.S. market. Investors who want to get ahead of this huge development may want to snag this ETF today.
