Are Cannabis Stocks in Play After Biden's Marijuana Pardon?
Oct 7, 2022
President Biden sent Cannabis stocks and ETFs soaring on news of potential changes to the federal laws surrounding Cannabis, including pardons for simple marijuana possession.
As I’ve said before, no one should be in jail just for using or possessing marijuana.— President Biden (@POTUS) October 6, 2022
Today, I’m taking steps to end our failed approach. Allow me to lay them out.
This news has been waited on for quite some time, as many states have already legalized the use and sale of this commodity, with many traders looking to capture some alpha of the “new” hot commodity.
1.) MSOS – Advisor Shares Pure US Cannabis ETF
2.) MJ – Alternative Harvest ETF
Here are two ETFs that track the space and give exposure to US or US/International Cannabis markets:
MSOS – Advisor Shares Pure US Cannabis ETF
MSOS is one of the only ways to get exposure to US based Cannabis companies via derivatives it holds in these companies. Because of the legal situation of Cannabis in the US – Cannabis not being legal across all state lines – US based Cannabis companies can’t be listed on the major US based exchanges. They trade off exchange on the over-the-counter markets (OTC) and are largely inaccessible to the average investor.
MSOS holding consists of derivatives tied to these companies, although the exact makeup can change as the fund is actively managed. Some of the main holdings consist of Green Thumb Industries, Curaleaf Holdings, Truilieve Cannabis, and Verano Holdings, which make up roughly 65% of the ETFs holding as of this writing.
On the news of Biden’s pledge to pardon prior federal marijuana offenders, the ETF saw a substantial gain of roughly 30% from near lows but was down nearly -60% as of the end of Q3.
The fund has a relatively high net Fees/Expense ratio of 0.73%.
MJ – Alternative Harvest ETF
MJ is a more global focus Cannabis ETF, with exposure in the US as well as internationally.
The fund has exposure to US based cannabis companies via its ETF, MJUS, which makes up 27% of the weighting of MJ. MJUS is like MSOS in that it focuses on US based cannabis companies through derivatives, with exposure to same names in Green Thumb Industries, Curaleaf Holdings, Truilieve Cannabis, and Verano Holdings.
The rest of the portfolio is made up smaller non-US based companies such as Canopy Growth Corp (CGC), SNDL Inc. (SNDL), Cronos Group Inc. (CRON), Tilray (TLRY), and Aurora Cannabis Inc. (ACB). These companies are all tradeable on US based exchanges.
MJ rallied 25% yesterday on the news but has seen a nearly -58% YTD and a -75% drawdown since inception.
The fund has a relatively high net Fees/Expense ratio of 0.75%
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