On April 5, Canada’s very first medical marijuana ETF started trading.
The Horizons Medical Marijuana Life Sci ETF (TSX:HMMJ) consists of 14 different companies related to the medical marijuana field. Assets include top pot growers like Canopy Growth Corp, Aurora Cannabis and Aphria Inc. Combined, those three companies make up just under 30% of total assets.
What makes the ETF unique is its exposure to marijuana-related industries. Scott’s Miracle-Gro Company is a large holding. Other positions are drug companies that only have a portion of their revenues come from marijuana research.
Despite only having $37.6 million in assets – which is tiny in the ETF world – investors are going gaga for the medical marijuana ETF. At approximately 1:45 pm Eastern Time on Monday, April 10, more than 1.2 million shares had changed hands.
Retail investors are particularly excited about this new ETF. Most transactions are for just a few hundred shares, which indicates the absence of any serious money.
It’s easy to get excited about the marijuana industry, especially considering a bill to legalize the drug is expected to be tabled in Canada on Thursday.
But investors should be cautious. Canada’s pot stocks are some of the most expensive out there, with many analysts saying the sector is starting to resemble the tech bubble of the late 1990s. When valuations get this stretched, bad things often happen.
In addition, the ETF’s management fee is 0.75%, which is far higher than average.
The bottom line? Be cautious on this new ETF. Canada’s pot stocks are still a speculative investment at this point.
