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Medical Cannabis Monthly Report | November

 

  • Cannabis reform was successful in all five states where voters were asked the question directly via ballot initiative
  • E-Commerce giant Amazon has dipped its toes into the CBD market in the UK showing increasing demand for CBD

 

Performance Review

The slow-down experienced by capital markets in September deepened further in October with Covid19 and uncertainty around US elections being major overhangs. Underneath the covers, anticipation of voter led cannabis reform became stronger with many polls showing strong support of ballot initiatives in five US states. Medical cannabis and CBD wellness names in our medical cannabis ETF showed strong performance through the month as investors rotated out of ancillary services under anticipation of a ‘blue wave’ scenario which would put medical cannabis legalization in the US as a 2021 objective.

Cannabis reform was successful in all five states where voters were asked the question directly via ballot initiative. In total, 13.4 million additional Americans now have more liberal access to medical or adult-use cannabis.[1] We expect first steps of reform to be active within the first six months of the new administration. More than anything, the lack of a blue wave has actually given investors a chance to position for cannabis upside on offer before the US institutions drive up valuations.

 

Medical Cannabis Index Monthly Performance



October

The Medical Cannabis and Wellness Equity Index (NTR)

0.26 %

Current performance is no guarantee of future performance. Source: Bloomberg/HANetf

 

Sub-sector

October Performance

Medical Cannabis

18.2%

CBD Wellness

9.4%

Ancillary Services

-3.7%

Pharmaceutical Cannabinoids

-12.9%

CBDX

0.2%

Past performance is no guarantee of future performance. Source: Bloomberg. Data as of 31/10/2020

 

Medical Cannabis and Wellness Equity Index (NTR) Performance and CBDX Medical Cannabis ETF

Total Return NAV to Date (up to 31/10/2020)

 

1M

3M

6M

YTD

12M

Since Inception

The Medical Cannabis and Wellness UCITS ETF (Acc)

 

0.19%

 

-4.10%

 

16.92%

 

2.24%

 

NA

 

2.24%

Medical Cannabis and Wellness Equity Index (NTR)

 

0.26%

 

-4.08%

 

17.07%

 

0.94%

 

-9.54%

 

1.87%

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 31/10/2020

 

 

Industry News

New Zealand’s much anticipated referendum on legalizing adult-use cannabis failed by slim margins as the final votes were tallied.[2] The referendum which would have allowed for personal consumption of cannabis lost out 47% to 53%. Although a blow to reformists, medical cannabis and CBD wellness remain legal in New Zealand and a fledgling industry continues to develop.

E-Commerce giant Amazon has dipped its toes into the CBD market with products now available for sale in a pilot programme for UK customers only.[3] Amazon’s commitment to having everything under the sun available to customers has identified CBD as a channel of growth. The pilot program is currently by invitation only and not accepting additional sellers. This is another validation of CBD slowly coming to the mainstream with broadening access for consumers.

 

 

Outlook

The smooth passing of ballot initiatives in five US states provides further insight into the broader acceptance of cannabis in the United States and nicely sets up further State level legalization efforts. With New Jersey making adult-use cannabis consumption and sale legal, we are now seeing a domino effect in the eastern US with neighbouring states setting legalization goals for themselves. New York has already stated that cannabis legalization will come in 2021, whereas smaller states like Rhode Island and Connecticut have expressed similar interests. Even very conservative states like North Dakota and Montana passed medical legalization which again alludes to broader acceptance for cannabis consumption.

Within the coming months as the US switches over to a more cannabis friendly administration, we expect to see legislation tabled which will progress the cause on a federal level, benefiting our medical cannabis ETF. The lowest hanging fruit we believe is the SAFE Act which will aid in the growth of current players, followed by the STATES Act which will effectively hand over control to individual states and make cannabis pseudo-legal in the US. Vice President elect Kamala Harris has previously been a lead sponsor of the MORE Act in the US Senate, which would effectively legalize medical cannabis.[4] We think there’s a possibility for this level of reform to happen but it will be a protracted fight with the Republican Senate to make this happen. In any manner, the total addressable market for cannabis continues to increase.

 

 

Constituent News

We have mentioned previously how ancillary services provides a truer look when it comes to valuations of cannabis businesses. GrowGeneration (GRWG), a hydroponics provider to cannabis growers, has now returned in excess of 153% this year alone as fundamentals show massive upside to earnings coming directly from cannabis growth.[5] The massive increase in their business combined with ability for large institutions to invest in the business legally has elevated earnings, valuing growth in the company on par with cloud technology and SAAS businesses.

GW Pharmaceuticals (GWPH) announced the initiation of pivotal phase 3 study of Nabiximols for Multiple Sclerosis-Associated Spasticity. Although this drug is approved in over 25 countries for the condition,[6] the start of the phase 3 trial has the potential to bring a very large addressable market to commercialization. Due to previous successes in Europe, the drug is anticipated to pass safety and efficacy standards of the FDA. GWPH continues to blaze the path forward for cannabis based pharmaceutical drugs and the news has been followed by very positive price action for the stock as well.

 

Top 10 Constituents

Weight

Arena Pharmaceuticals Inc

22.25%

Innovative Industrial Properti

17.94%

Scotts Miracle-Gro Co/The

15.08%

GW Pharmaceuticals PLC

11.24%

GrowGeneration Corp

8.43%

Cara Therapeutics Inc

6.60%

Amyris Inc

5.44%

Charlottes Web Holdings Inc

2.66%

NewAge Inc

2.30%

Medicenna Therapeutics Corp

1.90%

 

Region Breakdown

Weight

United States

86.47%

Great Britain

11.24%

Canada

2.29%

Source: Bloomberg / HANetf. Data as of 31/10/2020

 

 

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 IE00BG5J1M21 EUR Acc
SIX CBDX SW CBDX.S IE00BG5J1M21 CHF Acc


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