Why Pressing Pause On This ETF May Be A Good Idea

The cannabis sector is one which has almost completely lost its luster in recent months. Investors are largely shying away from investing in this sector in favor of other sectors which have greatly outperformed, such as technology.

With the hype machine seemingly turned off for cannabis stocks broadly, some value investors may be enticed to step in to cannabis via an Exchange Traded Fund (ETF) such as the Horizons Medical Marijuana Life Sciences ETF (TSX:HMMJ).

As I’ve said before, I think the legal cannabis sector in Canada has a long way to go to become viable and profitable over the long-run. Global appetite to legalize cannabis is not as high as many have thought, and Canada and Uruguay appear to be on an island in terms of legalizing recreational cannabis usage.

The global rush to legalize cannabis may be on hold, and without this key driver, I’d recommend investors hit "pause" for the time being.

Most of the companies held in the HMMJ ETF are small Canadian companies, and as such, this ETF does not truly reflect the private business done in the cannabis sector, which makes up the majority of recreational usage globally.

While I think it’s still way too early to invest in this sector, I’d encourage investors to keep HMMJ on their watch list, as I do think we could see another hype wave come if the U.S., U.K., or other large market legalizes recreational pot in the years to come. Until then, this isn’t a global sector and this ETC therefore remains too speculative, in my view.

Invest wisely, my friends.