- As the state of
Georgia broke the deadlock between the US Houses of Congress, a clear path from
the Democrats to implement their agenda has been made.
- The cannabis
industry eagerly awaits the decision on the passing of the MORE and SAFE Act.
Performance Review:
After a strong breakout in
November, cannabis stocks consolidated their strength in December as investors
priced in an improved outlook under a Democratic House and Presidency. This
momentum has continued through January with a surprise Senate takeover by the
Democrats which greatly improves the odds of cannabis reform in the US. Going
forward, we see significant tail winds carrying the industry through 2021.
Momentum in the US is at full swing for legislative reform both at federal and
state levels. In the UK, incumbents are racing to be the first to list on the
LSE and international supply chains are gaining strength to supply the growing
European market.
Within the CBDX universe, the
performance along the medical cannabis and ancillary services sectors remained
very strong. Medical cannabis names performed very well on the back of
strengthening supply chains and increased distribution. Ancillary names on the
other hand have been directly connected to US cannabis momentum. Investors unable
to invest directly in plant-touching companies are taking the indirect route;
in the process taking valuations higher for these non-plant touching companies.
The only sub-sector in the red was CBD Wellness where investors took profits,
capturing the strong performance of the previous month.
Source of all data: Bloomberg.
Medical Cannabis Index
Monthly Performance
|
December
|
The Medical Cannabis and Wellness Equity Index (NTR)
|
9.74 %
|
Current performance is no guarantee of future
performance.
Source: Bloomberg/HANetf
Sub-sector
|
December Performance
|
Medical Cannabis
|
33.3%
|
Ancillary Services
|
28.2%
|
Pharmaceutical Cannabinoids
|
16.4%
|
CBD Wellness
|
-3.1%
|
CBDX
|
9.65%
|
Past performance is no guarantee of future performance.
Source: Bloomberg. Data as of 31/12/2020
Medical Cannabis and Wellness
Equity Index (NTR) Performance and
CBDX Medical Cannabis ETF
Total Return NAV to Date (up to 30/12/2020)
|
1M
|
3M
|
6M
|
YTD
|
12M
|
Since Inception
|
The Medical Cannabis and Wellness UCITS ETF (Acc)
|
9.65%
|
39.12%
|
41.28%
|
41.97%
|
-
|
41.97%
|
Medical Cannabis and Wellness Equity Index (NTR)
|
9.74%
|
39.47%
|
41.71%
|
40.41%
|
40.41%
|
41.71%
|
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 31/12/2020
Industry News
In early January, the state of
Georgia broke the deadlock between the US Houses of Congress resulting in a
cleared path for the Democrats to go about implementing their agenda. This
bodes well for cannabis reform as the Marijuana Opportunity, Reinvestment and
Expungement (MORE) Act passed in the lower House as recently as December 4th.
Although legalization will have hurdles, there are multiple other bills drafted
which will accelerate growth for the sector. Next, it is important to keep an
eye on the SAFE Act, which will allow cannabis businesses to operate with the
same access to capital and financial services as other industries.
Constituent
News and November Rebalance
The top performer of our cannabis ETF GrowGeneration
(NASDAQ:GRWG) continued executing on its roll-up strategy in an effort to
create the largest hydroponics provider to cannabis operators in the US.
Raising US$125m via a secondary offering in December,[1] the company
completed three separate acquisitions in December to grow its distribution
footprint. The stock has been an outstanding investment for CBDX in 2020 with
total returns of 880%.
Innovative Industrial Properties (NYSE:IIPR)
has been
directly involved in the success of many US cannabis operators, providing
off-balance sheet financing via sale-leaseback of property. The REIT has been
able to deploy capital across the US with cap rates between 12-15%, well above
the industry average. With closing of multiple properties in December, the
company has expanded its portfolio to 66 properties comprising 5.4M square feet
over 17 states.[2] The stock has returned 151% in 2020 as investors
pile into the non-plant touching sectors of US cannabis.
Top 10 Constituents
|
Weight
|
Innovative Industrial Properties
|
16.68
|
Scotts Miracle-Gro Co/The
|
14.03
|
GrowGeneration Corp
|
13.81
|
GW Pharmaceuticals PLC
|
13.56
|
Arena Pharmaceuticals Inc
|
9.48
|
Amyris Inc
|
9.11
|
Turning Point Brands Inc
|
6.16
|
Cara Therapeutics Inc
|
5.11
|
22nd Century Group Inc
|
2.20
|
Charlottes Web Holdings Inc
|
2.13
|
Region Breakdown
|
Weight
|
United States
|
84.29%
|
Great Britain
|
13.56%
|
Canada
|
2.15%
|
Source: Bloomberg /
HANetf. Data as of 31/12/2020
Outlook
The US cannabis trade is now running full
steam ahead. With a ‘blue wave’ there is significant upside for the CBD
wellness and ancillary services industries in the US, which are sharing the
growth rates of the underlying cannabis industry. There is significant momentum
not only at the federal level with multiple cannabis bills expected to be
tabled soon but also at the state level as pandemic hit government coffers look
towards taxation revenues for some relief. States such as New York, Virginia, and
even Texas are debating now debating the advantages of cannabis legalization
and its impact on job creation, social inequality, and most importantly tax
revenues.
In the UK, within the first half we expect to
see multiple cannabis operators to become listed on the London Stock Exchange.
Patient count is rising at a consistent pace and officials expect up to 15,000
patients to be registered with Project 2021 by the end of the year. The largest
data collection exercise in the world should start yielding results which will
make both physicians and patients more comfortable with cannabis as a
mainstream rather than fringe treatment.
Our cannabis ETF has had a great run in 2020 with returns
in excess of 40%. This upside has mostly been captured through the
proliferation of cannabis in the United States. We expect this trend to be even
stronger in 2021 as further reform in the US will provide regulatory precedence
for many countries around the world. There is still significant addressable
market yet to come online and CBDX is a worry-free way to access this secular
growth.
Medical Cannabis ETF Details
The
Medical Cannabis and Wellness UCITS ETF, is a UCITS compliant Medical Cannabis ETF domiciled
in Ireland.
The
fund 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
|
IEE00B5J1M21
|
EUR
|
Acc
|
SIX
|
CBDX SW
|
CBDX.S
|
IE00BG5J1M21
|
CHF
|
Acc
|