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Medical Cannabis Monthly Report | July

 

Visit our Medical Cannabis ETF fund page for more information.

  • Since the November 2020 elections, 11 states have opted to liberalize cannabis regulations
  • Mexico’s Supreme Court voted 8-3 in favour of decriminalization of adult-use cannabis as a means to reduce drug-fueled cartel violence in the country
  • Ancillary services are the first to benefit as investors look for growth exposure in a non-plant touching manner

 

Performance Review

Starting the year with a bang after Democrats took control of all three branches of Government, the US cannabis industry has been slowly realizing the challenges of handicaps that come with federal illegality. Valuations peaked in February and have meandered since, even as operator economics continue to improve. Our Medical Cannabis ETF ended the first half of the year up 24.24%. The industry is still early in development and although short-term noise continues to dominate daily price action, there is immense value to be unlocked over a longer time horizon.

CBDX Performance

June

12 Month*

1.21%

75.52%

Past performance is no guarantee of future performance. Source: Bloomberg, HANetf *12 Month figures based on 30.06.20-30.06.21

 

The best performing sub-sectors through the first half of the year were pharmaceutical cannabinoids and ancillary services. Pharmaceutical cannabinoids have found new footing after GW Pharma was acquired by JAZZ Pharma. Many peers have also lifted in valuations as the end goal of FDA approved drugs becomes clearer and more attainable. Regulators continue to soften the limitations on cannabinoid research and hand out additional licenses mfor cultivation of research materials. Likewise, ancillary services have also performed very well but this directly ties back to the improving backdrop of US politics. Ancillary services are the first to benefit as investors look for growth exposure in a non-plant touching manner.

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 30.06.2021)


1M

3M

6M

YTD

12M

SI

The Medical Cannabis and Wellness UCITS ETF (Acc)

1.21%

-8.40%

24.24%

24.24%

75.52%

76.38%

Medical Cannabis and Wellness Equity Index (NTR)

1.21%

-8.29%

24.44%

24.44%

76.35%

76.35%

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 30/06/21

 

Industry News

Americans now have a long history of voting for changes to cannabis regulations with many states opting to liberalize since the November 2020 elections. The list is as impressive as it is long with all of the following states passing some version of cannabis reform; New Jersey, Arizona, Montana, South Dakota, Mississippi, New York, Virginia, New Mexico, Alabama, Louisiana, and Connecticut. As voters make their case, we are now starting to see support from American corporations & institutions as well which have long penalized cannabis use amongst employees. In June, Amazon announced that it would stop testing for cannabis as part of its drug screening program. Additionally, Amazon voiced support for the MORE Act, which is the most comprehensive bill aimed at de-scheduling cannabis. Apple also recently changed policy to allow for cannabis businesses to list applications on its App Store. Lastly, the FBI has also recently made more lenient their cannabis testing policy for applicants into the Federal institution.

Mexico’s Supreme Court voted 8-3 in favour of decriminalization of adult-use cannabis as a means to reduce drug-fueled cartel violence in the country. Although medical cannabis has been legal in Mexico since 2017, the adult-use program was only deemed unconstitutional in 2018. Although hurdles still remain, the Mexican market is slowly coming to the forefront bringing with it a population of almost 130M people. From the holdings of the Fund, there are currently two companies (Clever Leaves and Khiron), which are working to expand their presence in the country and should directly benefit from the development of the Mexican cannabis industry.

 

Outlook

A key tool the modern investor has in their arsenal is the ability to increasingly diversify as regulators become more comfortable with additional asset classes and industries. Within the equity bucket, it becomes prudent to allocate to secular trends pointed towards long term outcomes. Examples of such trends include the ubiquitous role of the internet and software in our daily lives, the electrification of automobiles, a global shift towards renewable energy sources, and the development of cannabis as a legal industry. Upon identification, it’s prudent to invest with an eye on the future and this is where the thematic exposure offered by our Medical Cannabis ETF fits into portfolios of all sizes. A robustly growing industry combined with upcoming regulatory catalysts which are accelerated globally makes for a very attractive return/risk opportunity for all portfolios with medium to long term investment horizons.

 

Visit the fund page for more information.

 

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