The cannabis-related ETFMG Alternative Harvest ETF (MJ – Free Report) topped the list of the best performing ETFs of August, with impressive returns of about 22.5%. It also attracted $22 million in capital, putting it on track for the largest monthly inflow since February.
The surge was primarily driven by the legalization of the nationwide recreational use of cannabis in Canada effective Oct 17 that has paved the way for a merger mania, attracting a large number of deal activities.
The real craze came this month as a number of alcoholic beverage companies are showing interest in partnering with the cannabis producers. This is especially true as beer and spirits giant Diageo (DEO – Free Report) is in talks with three Canadian pot producers for buying a stake or forming a partnership to produce cannabis-infused beverages. An international producer and beer marketer Constellation Brands (STZ – Free Report) invested $3.8 billion on Aug 15 to increase its stake in Canopy Growth (CGC – Free Report), the biggest marijuana industry deal so far.
Molson Coors (TAP – Free Report) is also starting a joint venture with Hydropothecary to develop marijuana drinks in Canada while Heineken (HEINY)-owned Lagunitas launched a THC-infused sparkling water in California dispensaries on July 30.
Given the surge in deal-making by marijuana stocks, worldwide spending on legal cannabis is expected to hit $57 billion by 2027 led by growth in North America and Europe, per the new report by ArcView Market Research and BDS Analytics. North America will continue to see maximum spending, rising from $9.2 billion in 2017 to $47.3 billion in 2027.
Let’s take a closer look at the fundamentals of MJ.
MJ in Focus
This is the first and only ETF targeting the cannabis/marijuana industry. It tracks the Prime Alternative Harvest Index, designed to measure the performance of companies within the cannabis ecosystem, benefiting from global medicinal and recreational cannabis legalization initiatives. The fund holds 40 securities in its basket with a higher concentration on the top firms. Canadian firms make up 61% of the portfolio, while American firms comprise just 21%.
