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Medical Cannabis Monthly Report | February

 

  • The U.S. is on the verge of federal reform, while London prepares for its first cannabis listing, and France gets started on its pilot program
  • Medical cannabis names experienced some pressure as investors focused on US centric investments whereas medical cannabis names are mostly focused towards South American and Europe
  • With the Democrats in the driving seat, legislative leaders have made clear that cannabis reform will be a priority item for 2021

 

The Medical Cannabis ETF Performance

January

12 Month*

15.07%

57.40%

Past performance is no guarantee of future performance. Source: Bloomberg, HANetf *12 Month figures based on 31.01.20-31.01.21

 

Performance Review

Cannabis stocks continue to outperform in 2021 as the sector evolves and strengthens in multiple international jurisdictions. The U.S. is on the verge of federal reform, while London prepares for its first cannabis listing, and France gets started on its pilot program. Elsewhere, Mexico has put forward comprehensive cannabis reform and the Canadian supply chain continues to improve. There are many layers of tailwinds bringing cannabis to mainstream attention, and institutional investors are starting to take notice.

Within the CBDX universe, the performance along the US federal reform theme remained the strongest. Ancillary services have soared as investors looked towards increased signals from legislatures about forthcoming reform. Since these businesses don’t have an overhang of federal legality, they serve the broadest variety of investors and therefore are the best representation of cannabis proliferation in the US. The verticals of CBD wellness and pharmaceutical cannabinoids also performed well during the month. Medical cannabis names experienced some pressure as investors focused on US centric investments whereas medical cannabis names are mostly focused towards South American and Europe.

 

The Medical Cannabis ETF Performance Table

As of 31.01.2021

 

1M

3M

6M

YTD

12M

SI

The Medical Cannabis and Wellness UCITS ETF (Acc)

15.07%

59.79%

53.23%

15.07%

57.40%

63.36%

Medical Cannabis and Wellness Equity Index (NTR)

15.16%

60.20%

53.66%

15.16%

57.19%

63.20%

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 31/01/2021

 

Industry News

With the Democrats in the driving seat, legislative leaders have made clear that cannabis reform will be a priority item for 2021. This includes significant changes to cannabis’ drug classification and the sector’s access to capital markets. The Democrats frame this as an exercise of overturning the injustices of the ‘war on drugs’ and its impact on minority communities. However, it’s quite easy to gain momentum for a legislative action expected to add hundreds of thousands of jobs to a struggling job market and billions of dollars to extended federal coffers.

Mexico published rules to regulate medical cannabis, setting up for a federally legal industry and taking another step towards cannabis reform. The new law allows pharmaceutical companies within the country to officially research cannabis for medicinal purposes. Additionally, it also allows for testing of cannabis for adult-use purposes. Pharmaceuticals have long found road-blocks to carry out comprehensive research and this is another step in the right direction.

The French Government continues on its steps towards a medical cannabis pilot program by finalizing six producers to provide medical cannabis to the program. These include firms from Australia, Israel, UK and Canada. The program is expected to start in March for 3000 patients and will last two years.

The London Stock Exchange (LSE) expects to list its first medical cannabis company in mid-February. UK investors will now have direct access to medical cannabis names for investment purposes. The LSE joins an exclusive club of senior exchanges to list medical cannabis names such as Canada, Australia and Israel. The capitalizations of these companies are expected to be small but are a giant step to increase investor access to the space.

 

Constituent News

GW Pharmaceuticals (GWPH) to be acquired by Jazz Pharmaceuticals (JAZZ) in a deal worth US$7.2B.[1] This follows shortly after GWPH had announced a record setting $500M+ in sales for the calendar 2020 year.[2] This transaction marks the entry of mainstream pharmaceuticals validating the pharmaceutical cannabinoid theme and we expect further interest from big pharma into cannabinoid research.

The Ancillary Services vertical continues to grow and outperform as investors search for cannabis related growth in a non-plant touching manner. This has led to multiple companies making way to public markets as their demand increases. Examples include the likes of hydroponics wholesale HydroFarm (HYFM), developer of grow solutions Agrify (AGFY), and marketing technology provider WeedMaps (going public through Silver Spike SPAC (SSPK)).

 

Outlook

Legislative leadership in the US has doubled down on their cannabis reform promises and the ancillary service and CBD wellness sectors have outperformed upon this expectation. There is significant momentum on the Federal landscape for comprehensive reform to be passed by the end of the year for medical cannabis while decriminalizing adult-use cannabis. Additionally, state level progress continues to perform better than expectations, mosty notably in Arizona, Virginia, and New York.

In the UK, we expect to see at least three cannabis related listings on the LSE by the end of February which should garner attention of UK and European investors. Pharmaceutical cannabinoids will also continue to gain attention with the validation of GW Pharma’s model through the recent acquisition.

CBDX continues to perform strongly with January returns of 15%. Currently most of the upside is attributed to ancillary services which are capitalizing on US reform momentum. We expect this to continue until reform is actually passed at which time the baton will be passed on to the medical cannabis sector. We expect 2021 to be a strong year for cannabis in the US and beyond that we are excited to see the UK and Europe moving towards a more progressive approach to cannabis.

 

Product 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.

Visit the CBDX Fund Page for more information. 

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