Overview: The ETFMG Alternative Harvest ETF (NYSE: MJ) tracks a market-cap-weighted index of global firms engaged in the legal cultivation, production, marketing or distribution of cannabis, cannabinoids or tobacco products.
- MJ is the first pot-focused ETF to trade in the U.S. The fund tracks an index of stocks across the globe that are engaged in the legal cultivation, production, marketing or distribution of cannabis products for either medical or nonmedical purposes.
- MJ also holds stocks of companies that trade or produce tobacco or tobacco products, or fertilizers, plant foods, pesticides or growing equipment for cannabis or tobacco. Besides, the fund can hold pharmaceutical companies that produce, market or distribute drug products that use cannabinoids.
- MJ can only hold companies that are engaged in legal activities and possess all necessary permits. At the time of launch, the fund did not include companies growing or distributing marijuana in the U.S. due to its continuing prohibition at the federal level.
- The index provider uses publicly available sources to identify companies that derive more than half their revenue from cannabis-related activities. MJ includes roughly 30 stocks, reconstituted and rebalanced quarterly.
- The expense ratio is on the high side for an index-based equity ETF. Before Feb. 9, 2018, the fund traded under the ticker MJX. Before Dec. 26, 2017, the fund was called the Tierra XP Latin America Real Estate ETF and tracked an index focused on Latin America, real estate companies. The ticker symbol was LARE.
Source: etf.com
Current Holdings:
Key and unique differentiating factor:
- First and only U.S. ETF to target the cannabis/marijuana industry
- Many other significant applications for cannabis and THC based medicines and treatments ranging from epilepsy to cancer treatment to non-opioid pain management
- Legal marijuana is approximately a $7B a year business in the US and rapidly growing as legalization spreads
Sectoral and geographical diversification:
Dividend history: ETFMG Alternative Harvest ETF declared a quarterly dividend on Wednesday, September 26th. Investors of record on Wednesday, September 26th will be given a dividend of $0.05 per share on Thursday, September 27th. This represents a $0.20 dividend on an annualized basis and a dividend yield of 0.59%.
Industry Overview:
Recent developments and price drivers:
- There is a plethora of evidence that the emerging cannabis industry is growing steadily and gaining legitimacy. Per research firm Euromonitor, the American market for legal marijuana products will reach $20 billion by 2020, up from $5.4 billion in 2015.
- MJ is the first and only pure-play US-listed ETF targeting the cannabis industry–holds 37 companies that are involved in legal cultivation, production, marketing or distribution of cannabis or related products.
- As per Delloite, the total cannabis market in Canada, including medical, illegal, and legal recreational products, is expected to generate up to $7.17 billion in sales in 2019—up to $4.34 billion of which will come from the legal recreational market. Medical cannabis is anticipated to generate an additional $0.77 billion to $1.79 billion in sales, with the illegal market bringing in a further $0.51 billion to $1.04 billion. Overall consumption through legal channels is expected to rise by up to 35 percent, as likely new consumers offset the proportion of current ones who elect not to transition to legal channels. What the cannabis spends overall is also expected to rise by up to 58 percent, owing primarily to the fact that prices for legal products will be higher.
Source: Deloitte analysis
The drivers as mentioned above are partially mitigated by:
- The possession and use of marijuana, even for medical purposes, is illegal under federal and certain states’ laws, which may negatively impact the value of the Fund’s investments. Use of marijuana is regulated by both the federal government and state governments, and state and federal laws regarding marijuana often conflict. Even in those states in which the use of marijuana has been legalized, its possession and use remain a violation of federal law.
- Companies involved in the marijuana industry are at the nascent stage, face intense competition, may have limited access to the services of banks, may have substantial burdens on company resources due to litigation, complaints or enforcement actions, and are heavily dependent on receiving necessary permits and authorizations to engage in medical marijuana research or to otherwise cultivate, possess or distribute marijuana.
- Passive Investment Risk: The Fund is not actively managed and therefore would not sell an equity security due to current or projected underperformance of a security, industry or sector unless that security is removed from the Index.
Return highlights:
Stock Performance
On Tuesday, October 23, 2018, MJ was at $31.73 on volume of 1.0 million shares exchanging hands. Market capitalization is $678.89 million. The current RSI is 34.06
In the past 52 weeks, shares of MJ have traded as low as $0.74 and as high as $45.40
At $31.73, shares of MJ are trading below its 50-day moving average (MA) at $35.97 and below its 200-day MA at $31.84.
The present support and resistance levels for the stock are at $30.42 & $39.40 respectively.
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