Investors interested in the US marijuana market will soon gain exclusive exposure to US pot stocks once Horizons ETF Management Canada creates an exchange-traded fund (ETF) that only contains US cannabis producers.
Horizons ETF Management's CEO Steve Hawkins announced that it is actively pursuing the creation of an ETF that will only contain US licensed cannabis producers, giving investors direct exposure to the underlying US marijuana market.
Horizons Marijuana Life Sciences Index ETF (TSX:HMMJ), which is the largest Canadian cannabis ETF and includes 59 stocks, provides investors with diversified exposure to North American cannabis companies. However, HMMJ cannot hold any firms with US marijuana operations because the Toronto Stock Exchange prohibits listing companies that aren't compliant with federal law where they operate.
Accommodating the Expanding US Pot Market
It's no secret that the US pot market is expanding rapidly, with legal spending expected to reach $22 billion USD by 2022, and investors are keen to get in on the action. At present the drug remains illegal at the federal level, meaning there are no ETFs that include companies growing or distributing marijuana in the US.
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At present, one of the only exchanges to accept US-focused cannabis company listings is the Canadian Securities Exchange. Considering that seven of the ten largest pot stocks by market value are now primarily focused on the US, the creation of a US-only ETF will likely offer a boost to US pot stocks.
HMMJ Boasts Big Numbers
The Horizons Marijuana Life Sciences Index ETF has more than $1 billion in assets and returned over 60% this year, making it the best-performing equity ETF listed in Canada. Although it's unclear if its US counterpart will have the same success, the returns are very encouraging.
Although US marijuana producers are not allowed to list on the TSX, companies that deal with hemp-only products are now welcome following the passing of the US Farm Bill. HMMJ took advantage of this exception by adding Colorado-based Charlotte's Web Holdings (CSE:CWEB) (OTCQX:CWBHF) earlier this week. Charlotte's Web produces and sells hemp-based, cannabidiol (CBD) wellness products in the US.
Which US pot stocks do you think should be included in the new Horizons ETF?
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