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Medical Cannabis Monthly Report | August

  • 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.

 

Medical Cannabis ETF performance Review

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. 

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