New U.S. ETF Mingles Medical Marijuana with Big Tobacco

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The first U.S. cannabis based ETF began trading on Arca on Monday. The ETFMG Option Harvest ETF (MJX) is comprised of lots of Canadian stocks focused on medical marijuana, and peculiar enough, with huge tobacco also.

ETF popularity is surging and might be rewarding for financiers thinking about the cannabis industry since a weighted average is most likely to be less volatile than an individual stock. The equity market typically pairs instruments in manner ins which do not make good sense to the general public, and this might be among those instances. With a mixture of medical cannabis companies and tobacco companies like Philip Morris, the blend seems a contradiction.

The key here is that of these companies run legally. Although pot shops in the U.S. tend to earn money hand over fist, they are not straight represented in this index, as their activities are not approved at the federal level.

The portfolio’s biggest holdings include Cronos Group, with a weight of 6.23%; Canopy Development, at 5.9%; GW Pharmaceuticals, at 5.5%; CannTrust Holdings, at 5.37%; and MedReleaf Corp., at 5.22%. Half of the fund’s properties are purchased the healthcare sector, with consumer staples weighted at 31% and products at 9%. Canada, where cannabis is legal at the national level, has a 41% weighting in the index, while U.S. companies are weighted at 34% and U.K. business at 9%.

Surprisingly, the fund holds huge tobacco names such as Imperial Brands, Philip Morris, Altria Group and British American Tobacco. Regardless of their size, those all rank in the bottom half of the index when it concerns their respective weights.

In fact, “Huge Tobacco” has been eyeing the cannabis space for years, by all accounts, and there is significant synergy in between the two industries, especially with the rise of e-cigarettes and vaping.

If the creation of MJX is any indication of the future, numerous medical cannabis supporters might be disappointed to see big tobacco sink its fingers into the cannabis industry. Would you purchase a medical marijuana ETF if it likewise had tobacco business in it too?

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