Should You Bet on This Cannabis ETF in the Second Half of 2019?

Canadian cannabis stocks have lost momentum in the late spring and early summer this year. This is in large part due to disappointing earnings at the top producers.

One of the primary headwinds has been less-than-spectacular retail sales after recreational legalization. Canada has failed to capitalize on its golden opportunity to become a cannabis leader, and investors are feeling the pinch.

The Horizons Marijuana Life Sciences ETF (TSX:HMMJ) has been a top performer since its inception on April 4, 2017.

Investors will recognize the usual suspects on its top holdings list. They include Canopy Growth (TSX:WEED), Aurora Cannabis (TSX:ACB), Cronos Group (TSX: CRON) and Aphria (TSX:APHA). The ETF has climbed 30% in 2019 after a 19% drop in 2018.

Canada may have dropped the ball domestically, but most of the big LPs have adopted an international strategy. The push for recreational legalization in the United States on a federal level is in full swing, but progress has been slow.

Still, there sheer size of the U.S. market is worth betting on as companies like Canopy Growth have laid the groundwork for a quick build up.

Producers will ramp up production in the second half of 2019, so investor should expect supply to begin to challenge demand. In a few years time many experts foresee a glut, which will likely force out some of the smaller LPs.

 This ETF offers solid broad coverage of this growing sector. It is priced at the middle of its 52-week range. Investors who look to buy this summer should look long and expect headwinds in the near term.