Last week another marijuana ETF hit the Big Board, AdvisorShares Pure Cannabis ETF, ticker symbol YOLO (NYSE Arca).
The new entry into the marijuana boom, YOLO will track an actively managed portfolio of US and Canadian cannabis companies that derive 50% or more of their revenue from the marijuana and hemp industry.
YOLO joins the other marijuana ETF on the US market, ETFMG Alternative Harvest ETF, ticker symbol MJ (NYSE Arca), a three year old fund that has swelled to $1.18 billion. Because of their common industry focus, the two ETFs will share about 80% common holdings.
YOLO and MJ have similar expense profiles as well, 0.74% and 0.75% respectively. YOLO will invest 80% or more of its assets in equity securities from industries and sectors, ranging from agriculture and biotech, to pharmaceuticals, real estate, and finance. And according to its prospectus, YOLO may also invest in a other securities, such as derivatives, futures, other ETFs and IPOs at management’s discretion.
…there is still a long way to go, but cannabis has taken on a social and financial legitimacy that cannot be ignored…
While at least 25% of YOLO will be in pharmaceutical, biotech and life sciences companies that are directly involved in cannabis and cannabinoid-related substances, the ETF will also invest in federally legal US companies that are not directly in the cannabis business, but intend to align with the industry. One example is Innovative Industrial Properties, a domestic REIT that is focussed on medical marijuana-related real estate.
Go here for a look at YOLO
Go here for a snapshot of MJ
Rapidly shedding its counter culture stigma, and with the general markets nearing their all time highs, how has the business of cannabis done based on the last three years of MJ performance (inception 12/03/2015)?
For the three year period from April 1, 2016 through 3/31/2019, MJ posted an annualized return of 17.65% based on NAV. In that same time period, the S&P 500 posted 13.52% annualized.
So, as the general markets are nearing their all time highs, cannabis returns have taken you even higher, an inexcusable pun, I admit.
As of today there are thirty-three states that have approved marijuana for medical, some outright and others with qualifying medical conditions.
Additionally, nine states and the District of Columbia allow recreational use, and other states have decriminalized its use recreationally.
There is still a long way to go, but cannabis has taken on a social and financial legitimacy that cannot be ignored. Modern Wall Street has digested everything from tech bubbles and terrorist attacks to mortgage derivative meltdown and political shenanigans, and so far, reefer madness has been a very orderly party, dude.