Marijuana ETF and its largest holding Tilray
Cannabis Industry is projected to be the fastest growing market in the world. This week the hot topic is Tilray, the Canadian pharmaceutical marijuana company. We are concluding a wild week of trading, in which the stock went from $117 to $300 intra-day Wednesday, back to $123 Friday noon. The stock went up driven by Drug Enforcement Agency approving its import to the U.S. for medical research. Later in the week stock lost steam, and although slightly up for the week as it currently stands, it marks a very rough ride for shareholders.
In one of my previous articles I have written about attempting to find a winner stock within an industry (First company to reach 10 trillion?). The same holds for weed companies which have gotten more attention in the past few years which typically brings pretty abrupt price swings. There are roughly 35 companies competing to rise within the growing cannabis industry. Investors usually look into ETF space when they are looking to express a view but diversify their holding across multiple stocks in the sector.
The largest US-based cannabis ETF is ETFMG Alternative Harvest ETF (MJ). The fund currently has approx $700 million in assets under management as investors poured another $70 million in its best month since January. Tilray was MJ’s largest holding at roughly 11% of the ETF is invested in this stock. Simply, for any dollar you invest in MJ, they would be putting 11 cents into Tilray and spreading out the rest to 30–40 other marijuana stocks. Here is where you can check the holdings of MJ each day (ETF MJ Holdings)
Going back to our introduction, price action in Tilray has been on a wild ride going from $117 to $300, back down to $123. On the other hand, MJ has also had a good price action given part of it is in Tilray itself, but it was much smoother. MJ started the week at $37, up to $45, and down to $39.50. In the end, even though Tilray had doubled its value during the week, MJ ended up outperforming. The wild ride that one can go on when picking single stocks has been fully manifested.
I am taking the risk to sound like a broken record, but it’s important to emphasize that smoother returns is a benefit of diversification provided by Exchange Traded Funds. Even if some companies do not succeed you could be compensated by other companies in the basket. That is, those companies that live to see 2027 and get a share of the projected $57 billion dollar cannabis business.
If you want to find more ETFs use our ETF Miner tool on our threadvest.com domain.