Friday, August 19, 2022

The New Medical Marijuana ETF Is Killing It, But Here’s Why Investors Should Be Cautious

Horizons Marijuana ETF Management has only been on the market for a week, but it is already poised to become one of the leading pot dealers on the planet, according to a recent analysis by MarketWatch.

The report shows the company’s product “Medical Marijuana Life Sciences,” which consists of a number of firms related to medical cannabis industry, including Scott’s Miracle-Gro and GW Pharmaceuticals, has been driving investors wild ever since it was launched on Monday.

So far, well over one million shares have been traded since yesterday afternoon.

Although the medical marijuana fund has collected somewhere in the neighborhood of $30 million in assets, which is pretty small in the grand scheme Exchange-Traded Funds, the majority of the transactions have only been for a few hundred shares, a detail that seems to indicate a lack of interest from big money investors, according to BayStreet Media.

Nevertheless, for a new fund to find so much success is a rarity. It is the most popular product of its kind to emerge this month, with its closest competition being the JPMorgan Global Bond Opportunities ETF – a fund that has secured around $25 million in assets.

“The Horizons fund represents something relatively rare for the modern-day ETF marketplace: a new fund that tracks an industry with heavy demand but which had no vehicle that investors can use to gain broad exposure,” markets reporter Ryan Vlastelica writes.

But while it can be easy to get overly excited about finally having a channel to invest in legal marijuana, some experts are urging caution.

Even though the majority of the businesses associated with the fund seem to have a solid foundation, there are some concerns that these types of marijuana investment opportunities could play out in a manner similar to how the dot-com buddle did toward the end of the 1990s.

That’s when investors previous stoked about the tech industry essentially figured out that all of these dot-com businesses carried little to no weight. In turn, companies worth billions of dollars on paper were all of a sudden diminished to nothing. The incident spawned a global recession – a situation where only the strongest of the strong survived.

“When valuations get this stretched, bad things often happen,” writes the BayStreet Staff. “Be cautious on this new ETF. Canada’s pot stocks are still a speculative investment at this point.”


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