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Medical Cannabis Monthly Report | December

 

Cannabis ETF

  • One special winner of the November elections was cannabis as five states voted for medical and adult-use cannabis reform
  • In addition to this tailwind, momentum continues with the passing of the MORE Act in the US House of Congress and the UN reclassification of cannabis as a deadly substance in early December.

 

Performance Review:

Financial markets rallied in November with strong performance across the board. One special winner of the November elections was cannabis. Voters in 5 states showed strong support for reform of cannabis laws for both medical and adult-use. This momentum has been hugely positive for the cannabis space as a whole and a big re-rate of the industry has taken a place through November. In addition to this tailwind, momentum continues with the passing of the MORE Act in the US House of Congress[1] and the UN reclassification of cannabis as a deadly substance in early December.[2] Although neither of these moves are expected to change the industry overnight, they are paving the path for a global cannabis trade in years to come.

Within our cannabis ETF universe, the best performing names fall in the Ancillary Services category. The reason behind this strength lies in the logistics of cannabis investing as many investors are still barred from investing in the space from their custodians and brokerages. This has meant that associated services experience crowding as investors look to capture the growth of this sector. Similarly, CBD Wellness and Medical Cannabis have also performed very well as sectors based on similar factors. Predictably, pharmaceutical cannabinoids which should be most insulated performed in line with broader markets rather than the massive outperformance of other cannabis verticals.

 

Medical Cannabis Index Monthly Performance



November

The Medical Cannabis and Wellness Equity Index (NTR)

26.75 %

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

 

Sub-sector

November Performance

Ancillary Services

40.0%

CBD Wellness

28.1%

Medical Cannabis

26.2%

Pharmaceutical Cannabinoids

12.4%

CBDX

26.6%

Past performance is no guarantee of future performance. Source: Bloomberg. Data as of 30/11/2020

 

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

Total Return NAV to Date (up to 30/11/2020)

 

 

1M

 

3M

 

6M

 

YTD

 

12M

 

Since Inception

 

The Medical Cannabis and Wellness UCITS ETF (Acc)

 

26.63%

 

13.20%

 

28.53%

 

29.47%

 

-

 

29.47%

Medical Cannabis and Wellness Equity Index (NTR)

 

26.75%

 

13.29%

 

28.75%

 

27.94%

 

19.69%

 

29.13%

 

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 30/11/2020

 

Industry News

On December 4th, on a much faster than anticipated time-line, the US House of Representatives voted on and passed the Marijuana Opportunity, Reinvestment and Expungement (MORE) Act.[3] Although the vote was expected to pass in the Democrat controlled House, the hastiness of the legislation being voted upon was entirely unanticipated as the Democrats have yet to formally move into the White House. Largely symbolic because of the Republican’s strong hold in the Senate, the legislation indicated that cannabis liberalization is on the Democrat agenda for 2021 as they look to add jobs and increase tax revenues.

On Dec 2nd, the UN de-scheduled cannabis for medicinal purposes with a vote by the Commission for Narcotic Drugs. This long-delayed vote passed with a slim margin of 27 to 25 but is expected to be highly influential as many governments look at global conventions for drug policy guidance.[4] This vote will eliminate many hurdles for countries in favour of medical cannabis, and expedite the rate of policy reform, cannabinoid research, and international trade for cannabis.

 

Outlook

The MORE Act is expected to be highly indicative of the state of US cannabis policy for the coming year. The much faster than expected passing of this Act through the House or Representatives indicated that cannabis is a ‘now’ and not a ‘later on’ agenda item for the Democrats. For US cannabis watchers, the Georgia run-off election in January now becomes even more important as it would decide the fate of the Senate. A Democrat controlled Senate will make federal cannabis reform imminent, but predictions are in slight favour of Republicans so far. Stepping back, even if the MORE Act has significant opposition, there are multiple other pieces of legislation which are anticipated to proliferate the US cannabis industry in 2021. Clearly, we see that the ruling party is in support and will continue to push their agenda.

On the international side, the UN vote is highly symbolic and heavily influential. We expect the rate of cannabis reform to accelerate on a global scale as medical cannabis becomes more accepted. This will also increase research into safety and efficacy of cannabis for which we have great precedence with GW Pharmaceuticals. In addition, the London Stock Exchange (LSE) is expecting to have medical cannabis listings as early as the first half of 2021. This means that many Brits could soon be holding cannabis in their retirement portfolios which track the LSE.

With a great run in November and for the calendar year, it’s diligent to question the future returns of cannabis investment. However, it’s important to note that cannabis industry is just starting. Within Europe, UK, and the US we are seeing increased jurisdictions adopt a legalization framework and the total addressable market is still in infancy. There is possibly a decade long growth story, and still early to invest in the creation of a whole new industry.

 

Constituent News and November Rebalance

In a scheduled rebalance, the fund removed two and added two securities at the end of November. The fund added Turning Point Brands (NYSE: TPB) and Cardiol Therapeutics (TSX: CRDL) and removed Youngevity International (NASDAQ: YGYI) and Tetra-Bio Pharma (TSX: TBP).

Turning Point Brands (NYSE: TPB), is a manufacturer, marketer and distributor of branded consumer products with active ingredients. The company recently announced a strategic investment into a global cannabinoid company dosist™ and an exclusive co-development and distribution agreement of a new national CBD brand in the US. TPB is the newest entrant into our CBD Wellness category as it develops a national brand aimed at the mass market with a current distribution network of more than 180,000 points of sale.[5] TPB’s investment with dosist is strictly for use in the THC-free Canadian business unit and not in connection with and business which is deemed illegal under US laws.

Cardiol Therapeutics (TSX: CRDL) is a clinical stage biotechnology company focused on developing innovative therapies for inflammatory heart disease. The Canada based company is focused on pharmaceutical development and recently received approval from the US FDA for its Investigational New Drug application for use against cardiovascular disease.[6] The company will fit into the Pharmaceutical Cannabinoids vertical for our cannabis ETF and is focused on formulations with are THC-free. The company now meets the minimum market cap requirements for the index and has been included on the basis of price appreciation.

Youngevity International (OTC: YGYI) is a lifestyle brand operating in three primary business segments including a commercial coffee enterprise, a commercial hemp enterprise and a multi-vertical omni direct selling enterprise. The commercial hemp operations were part of the CBDX’s CBD Wellness vertical. The company however, has failed to file their annual financial statements in appropriate times and has received a notice for delisting from the NASDAQ. The company plans to apply to relist on the NASDAQ in the near future.

Tetra-Bio Pharma (TSX: TBP) is a junior pharmaceutical company focused on drug development programs in chronic pain, oncology, and ophthalmology. The company has completed major milestones in 2020 on their pursuit for novel drug development. The company fits into the Pharmaceutical Cannabinoids vertical for CBDX. The deletion from the index is a result of a loss of capitalization as the company now fails to meet the minimum market cap requirements of the index. With continuation of the company’s operations and positive results, we expect market capitalization for the company to return in coming quarters.

 

Top 10 Constituents

Weight

Innovative Industrial Properti

18.67%

GrowGeneration Corp

14.02%

Scotts Miracle-Gro Co/The

13.98%

GW Pharmaceuticals PLC

13.81%

Arena Pharmaceuticals Inc

13.50%

Cara Therapeutics Inc

5.76%

Amyris Inc

5.02%

Charlottes Web Holdings Inc

4.01%

NewAge Inc

2.67%

22nd Century Group Inc

1.85%

 

Region Breakdown

Weight

United States

84.31%

Great Britain

13.81%

Canada

1.88%

Source: Bloomberg / HANetf. Data as of 30/11/2020

 

Product Details

The Medical Cannabis and Wellness UCITS ETF, is a UCITS compliant Medical Cannabis ETF domiciled in Ireland.  

Our 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

 

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