- The
emergence of institutional investors in the space is lifting valuation
multiples, especially for ancillary companies
- The
key market of US becomes a talking point into the 2020 elections. Democrats
will be addressing cannabis reform ahead of the elections and believe this
could cause significant momentum in the space.
July marked
another strong month of performance, with the cannabis growth vertical showing
resilience. Even as investors continue to question the narrow strength of the
stock market, underlying fundamentals in the cannabis industry are strong on
improving adoption and innovative product formulations. The index gained 6.21%
in the month of July, in line with the Nasdaq 100 and Russell 1000 Growth
Indices.
A few clear
industry patterns have taken hold a few months into the pandemic. Firstly, the
industry has experienced growth in CBD and adult-use cannabis sales as
consumers look to alleviate pandemic related anxiety and stress.
Second, the
growth of tele-medicine is beating the stigma of cannabis as more patients
become comfortable in a virtual setting and set patient growth records in many
states and countries.
Lastly, the
emergence of institutional investors in the space is lifting valuation
multiples, especially for ancillary companies which are experiencing parallel
growth to cannabis companies themselves.
Medical Cannabis Index
Monthly Performance
|
July |
The Medical Cannabis and Wellness Equity Index (NTR) |
6.21% |
Current
performance is no guarantee of future performance. Source: Bloomberg/HANetf
Sub-sector |
Average Return July |
CBD |
27.3% |
Ancillary |
8.5% |
Pharmaceutical |
-2.7% |
Medical |
-9.2% |
CBDX |
6.1% |
Past performance is no guarantee of future performance. Performance
since fund inception on Jan 9th, 2020
Source: Bloomberg. Data as of 31/07/2020
Medical Cannabis and Wellness
Equity Index (NTR) Performance and
CBDX Medical Cannabis ETF
Total Return NAV to Date (up to 31/07/2020)
|
1M |
3M |
6M |
YTD |
12M |
Since Inception |
The Medical Cannabis and Wellness UCITS ETF (Acc) |
6.10% |
21.92% |
- |
- |
- |
6.61% |
Medical Cannabis and Wellness Equity Index (NTR) |
6.21% |
22.05% |
2.30% |
6.21% |
-23.16% |
6.21% |
Performance before inception is
based on back tested data. Back testing is the process of evaluating an
investment strategy by applying it to historical data to simulate what the
performance of such strategy would have been. Back tested data does not represent
actual performance and should not be interpreted as an indication of actual or
future performance. Past performance for the index is in USD. Past performance is not an
indicator for future results and should not be the sole factor of consideration
when selecting a product. Investors should read the prospectus of the Issuer
(“Prospectus”) before investing and should refer to the section of the
Prospectus entitled ‘Risk Factors’ for further details of risks associated with
an investment in this product.
Source: Bloomberg / HANetf. Data
as of 31/07/2020
Industry News
As we inch
closer to US elections in November 2020, cannabis is starting to become a topic
of discussion for the Democrat party. In July, a Biden-Sanders Unity Task Force
released recommendations for developing the party agenda on cannabis reform.
This includes the federal legalisation of medical cannabis, while adult-use
cannabis is to be left to the will of individual states. The task force also
recommended the expungement of all criminal records related to cannabis
possession and consumption in an attempt to remediate long-standing social
injustices against communities of colour in the US. With recent momentum of
social justice movements such as Black Lives Matter, we believe cannabis reform
is more than just a hollow promise for the Democratic Party. It is important to
note that a White House win alone may not expedite the process, and we closely
watch the contested seats in the Senate as Democrats fight to take control from
the Republicans.
In the run-up
though, we continue to see an insatiable appetite from US investors for
cannabis related businesses with ancillary services sector having a breakout
month in July and leading into August. We expect this multiple expansion to
continue as a wider investor base realises the growth and margins on offer in
this still nascent industry.
Outlook
The second half
of the year has been nicely setup for some major catalysts on a macro and
company specific level. On a macro basis, the key market of US becomes a
talking point into the 2020 elections. We now have direction in which Democrats
will be addressing cannabis reform ahead of the elections and believe this
could cause significant momentum in the space.
Constituent News
CBD for pets is
showing to be a fast-growing niche in the US as cbdMD (YCBD)
announced that it’s brand, Paw CBD, experienced a 64% increase in net sales in
the second quarter of 2020. The company is reporting a $7mm annualized run-rate
for the product alone with healthy margins as direct-to-consumer sales
currently make up over 70% of the brand’s revenue [1]. Pet owners
report of decreased anxiety in their pets along with alleviation of symptoms
such neuropathic pain.
Portfolio ancillary company, GrowGeneration
(GRWG), reported stellar second quarter growth with revenues
up 123% year over year and same store sales increasing 49% as well [2].
The NASDAQ-listed hydroponics provider services businesses from the largest
cannabis growers all the way down to personal grows for medical patients. The
growth in demand for hydroponics is astonishing and shows off the staying power
of the cannabis industry as a whole. We take the multiple and price
appreciation to be signs of the times to come for federally legalised medical
cannabis in the US and the growth it brings along.
Top 10 Medical Cannabis ETF Constituents |
Weight |
Innovative Industrial Properties |
12.15% |
Amyris Inc |
10.84% |
Scotts Miracle-Gro Co/The |
10.50% |
GW Pharmaceuticals PLC |
9.82% |
Cara Therapeutics Inc |
9.78% |
GrowGeneration Corp |
9.46% |
NewAge Inc |
7.95% |
Corbus Pharmaceuticals Holding |
7.94% |
Charlottes Web Holdings Inc |
6.02% |
22nd Century Group Inc |
5.15% |
Regional Breakdown |
Weight |
United States |
90.18% |
Great Britain |
9.82% |
Canada |
0.00% |
Source: Bloomberg / HANetf. Data as of 31/07/2020
Medical Cannabis ETF Details
The
Medical Cannabis and Wellness UCITS ETF, is a UCITS compliant Medical Cannabis ETF domiciled
in Ireland.
Our Medical Cannabis ETF tracks a rules-based Medical Cannabis and Wellness Equity Index from
Solactive, consisting of publicly listed companies conducting legal business
activities across nine thematic sub-sectors in the medical cannabis, hemp and
CBD industries.
The
fund seeks to provide targeted exposure to the rapidly expanding legal medical
cannabis industry that is set for further growth as more countries legalise
cannabis for medical use.
Please
remember that the value of your investment may go down as well as up and past
performance is no indication of future performance.
Exchange |
BB Code |
RIC |
ISIN |
Currency |
Income |
London Stock Exchange |
CBDX LN |
CBDX.L |
IE00BG5J1M21
|
USD |
Acc |
London Stock Exchange |
CBDP LN |
CBDP.L |
IE00BG5J1M21 |
GBP |
Acc |
Xetra |
CBSX GY |
CBSX.DE |
DE000A2PPQ08 |
EUR |
Acc |
SIX |
CBDX SW |
CBDX.S |
IE00BG5J1M21 |
CHF |
Acc |
Click here to download. Medical Cannabis Monthly Report.