Medical Cannabis Monthly Report | March
- With the Democrats in the driving seat,
legislative leaders have made clear that cannabis reform will be a priority
item for 2021
- The total addressable market for the US
continues to increase as additional states adopt cannabis reform
- In the quarterly rebalance, the fund added 14
securities to bring the total number of securities held to 34. The new
additions included seven companies operating in the ancillary services sector,
three securities in each of the medical and pharmaceutical sectors, and one
single holding in the CBD Wellness sector
Past performance is no guarantee
of future performance.
Source: Bloomberg, HANetf
Month figures based on 29.02.20-28.02.21
After a strong start to the year, growth equities pulled
back in the last week of February as macro factors dominated the market
narrative. Concerns about valuations of high growth companies were front and
centre with the sharp move in the US treasury yield curve.
The market is now left pondering the impact of coming inflation and whether the
Federal Reserve will change its outlook. Even though cannabis stocks have
enjoyed great price appreciation in the past 12 months, there is still ample
opportunity for earnings growth deriving from the cannabis vertical based on
fundamental and jurisdictional factors. Past performance is no guarantee of
Within the universe of our medical cannabis ETF, performance
was strong across all sub categories and previously lagging names outperformed
as the market solidified confidence in the future of cannabis. Medical cannabis
names, which had lagged last year, outperformed significantly in February on
multiple appreciation. The pharmaceutical cannabinoids sector performed well on
the back of the recent acquisition of GW Pharmaceuticals. Ancillary services
continue to perform well as the US cannabis sector takes off with healthy
growth. At the end of February, the fund rebalanced to add 14 additional
securities to bring the total for the ETF to 34 securities.
Past performance is no guarantee of future performance.
Source of all data: Purpose Investments.
The Medical Cannabis and Wellness UCITS
ETF Performance Table
As of 28.02.2021
The Medical Cannabis and Wellness UCITS ETF (Acc)
Medical Cannabis and Wellness Equity Index (NTR)
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 28/02/21
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
The program is expected to start in March for 3000 patients and will last two
The London Stock Exchange (LSE) successfully listed two
medical cannabis and CBD wellness businesses in February bringing the first
such exposure to market for a senior European exchange. Australian medical
cannabis company, MGC Pharmaceuticals launched their dual list in February as
did Israeli medical cannabis firm Kanabo Group. These listings further fortify
the emergence of cannabis as a viable sector for long term investment mandates.
In late February, the Commonwealth of Virginia legalized
adult-use cannabis providing more liberalized cannabis access for another 8.5million
people in the United States.
The total addressable market for the US continues to increase as additional
states adopt cannabis reform. This has a positive impact on the ancillary
services sector which help in the infrastructure development and maintenance of
cannabis reform. Additionally, CBD wellness sector benefits by finding
additional distribution infrastructure.
Germany imported a record amount of cannabis in 2020, with
the industry growing 37% annually from the year before.
The German market continues to evolve as supply chains become more robust and Germany
seeks to increase cannabis trading partnerships outside of the historical
dominance of Netherlands and Canada.
Recent research report from BDSA indicates that cannabis
markets outside the US and Canada exceeded the US$1B sales mark in 2020 for the
first time. The firm expects International sales to top $8.3B in 2026 with a
CAGR of 40% for the next five years. The bulk of that new legal spending will
be driven by Mexico (104% CAGR) and Germany (36% CAGR), though the U.K. (57%
CAGR) and France will contribute significantly (186% CAGR).
In the quarterly rebalance, the fund added 14 securities to bring
the total number of securities held to 34. The new additions included seven
companies operating in the ancillary services sector, three securities in each
of the medical and pharmaceutical sectors, and one single holding in the CBD
Wellness sector. Roughly half the securities are new public businesses with new
listings, and the other half were included as price appreciation led to meeting
the fund’s minimum market cap requirement.
Ancillary Services: added the recent IPOs of Agrify Corp and
Hydrofarm in the United States. Both businesses are involved in development
infrastructure for the US cannabis industry. Additionally, the marketing and
e-commerce company WeedMaps has turned public through a SPAC transaction with
the name Silver Spike.
Medical Cannabis and Pharmaceutical Cannabinoids: many names in
these two sectors were added on the recent performance and market cap appreciation
of the securities. The recent GW Pharmaceutical acquisition shed light on the
undervalued assets in these two categories.
CBD Wellness: Hempfusion is a wellness business established in the
U.S. with a growing international presence. The company has a variety of CBD
brands and wide distribution throughout the country. The company also has plans
to sell products across Europe and Emerging markets such as China, Mexico and
In the near
term, capital markets are trying to decipher the signals of the bonds market,
which has investors on edge. Volatility remains elevated but it’s important to
keep the big picture in mind when it comes to the story of cannabis
proliferation. One part of this industry is selling a non-cyclical consumer product
with proven demand, where growth is secular and not relative. Other parts of
this industry are trying to establish new product forms through a multi-channel
approach, and these products have displayed many qualities which are moving
with consumer trends and not against. The industry has recently gone through a
phase of balance sheet strengthening, and now the near-term reforms are
providing an opportunity to prove the efficiency of business models. We expect
the next six to twelve months to be crucial in developing the long-term growth
rates of the industry.
The Medical Cannabis and
Wellness UCITS ETF, is a UCITS compliant Medical Cannabis ETF domiciled in
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 Cannabis ETF Fund Page for more information.
Click here to download our CBDX monthly report