Cannabis stocks soared on Friday following news that U.S. president Donald Trump is expected to sign an executive order as soon as Monday that would ultimately ease federal restrictions on marijuana.
The order would essentially reclassify marijuana from a Schedule I substance to Schedule III under the federal Controlled Substances Act. That would bring cannabis companies under different tax regulations that would benefit the industry. As Axios noted, this could also open the doors for additional medical research.
Overall, the reclassification could help bring more institutional investment into the cannabis industry. It could also allow access into traditional banking services. It’s a win-win for an industry that’s primarily been operating in a regulatory grey area. From an investment standpoint, the forthcoming executive order could cast cannabis companies in a new light and foster business growth.
“This the beginning of a new era of public health policy,” Shawn Hauser, a partner at cannabis-focused law firm Vicente LLP, told CNBC. “If implemented, it dismantles nearly a century of outdated drug policies that fly in the face of science and medicine.”
Of course, nothing is official until pen is put to paper. However, industry analysts feel certain it will happen.
″Trump rescheduling marijuana was not an if, in our assessment, but a when,” Ed Groshans of investment firm Compass Point said.
5 ETF Options
With cannabis stocks moving substantially higher, investors may want to take a look at associated ETFs that occupy this unique space. Five funds in particular include the AdvisorShares Pure US Cannabis ETF (MSOS), Roundhill Cannabis ETF (WEED), Amplify Seymour Cannabis ETF (CNBS), Amplify Alternative Harvest ETF (MJ), and the AdvisorShares Pure Cannabis ETF (YOLO). As noted by the CNBC report, CNBS jumped 35% following the news.
In terms of pure year-to-date performance, YOLO flies above the rest. Still, all five are easily outpacing the broader S&P 500 index with an average return of 43%. As TMX VettaFi Head of Index Product Strategy Jane Edmondson noted earlier this summer, the industry was already experiencing a resurgence. This latest news can only help further sustain the existing rally into next year.
Thematic ETFs in general have been showing early signs of a comeback this year. Because they focus on niche, nuanced investment themes, thematic funds are best reserved as satellite positions in investors’ portfolios. For investors who already have exposure to large-cap growth equities, thematic funds like the aforementioned cannabis ETFs make for ideal complementary growth amplifiers.
For more news, information, and analysis visit the Thematic Investing Content Hub.
VettaFi LLC (“VettaFi”) is the index provider for CNBS, for which it receives an index licensing fee. However, CNBS is not issued, sponsored, endorsed, or sold by VettaFi, and VettaFi has no obligation or liability in connection with the issuance, administration, marketing, or trading of CNBS.
