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How Cannabis ETFs Beat S&P 500 Past Month

Sanghamitra Saha
·3 min read

Shares of cannabis-related stocks and ETFs surged lately following a report that some strains of medical marijuana are proving effective to treat coronavirus. The report indicates that the medicinal marijuana could block up to 70% of the proteins used by the virus to infect cells. As a result, the entire cannabis sector jumped late last week.

If this was not enough, Canada’s Aurora Cannabis has agreed to buy U.S.-based CBD company Reliva, in order to enter the U.S. market. According to the Brightfield Group research firm, CBD sales are projected to surge to $24 billion in U.S. retail sales by 2025, as quoted on CNBC.

Cannabis Investing in Vogue Amid Pandemic

Marijuana stocks have performed better than the broader market in the difficult phase of coronavirus pandemic. The pure-play marijuana ETF MJ added 17.7% past month versus 5.3% gains in the S&P 500 index (as of May 22, 2020).

Overall, Global X Cannabis ETF POTX surged 35.4% past month, The Cannabis ETF THCX added 34.2%, AdvisorShares Pure Cannabis ETF YOLO gained 34.4%, Amplify Seymour Cannabis ETF CNBS advanced 26.3% and Cambria Cannabis ETF TOKE gained about 22.5% (read: Are Marijuana Stocks & ETFs Coronavirus-Proof?).

Amid widespread COVID-19-related lockdowns and store closures, many cannabis dispensaries received “essential business” designations, noted Global X. As a result, consumers hoarded medicinal and recreational cannabis in the quarter, which should result in better revenues for the pot companies. Sales have also been pretty strong for marijuana amid the latest virus outbreak.

Sales have been surging in Canada too where the new recreational cannabis market, named Rec 2.0, was launched in late 2019. Aurora Cannabis ACB recently stated that Rec 2.0 products could account for about 20% of total sales.

New store openings are another positive. In first-quarter 2020, Canada opened 191 new stores taking its total to 806, per the Global X report. The United States has nine times more dispensary licenses than Canada, which should facilitate more store openings in the coming days in the United States.

Investors should also note that sin stocks tend to perform better even in the time of recession. With marijuana apparently being an addictive item, sales are expected to remain almost unruffled in the ongoing recession.

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Aurora Cannabis Inc. (ACB) : Free Stock Analysis Report
 
AdvisorShares Pure Cannabis ETF (YOLO): ETF Research Reports
 
The Cannabis ETF (THCX): ETF Research Reports
 
Global X Cannabis ETF (POTX): ETF Research Reports
 
Cambria Cannabis ETF (TOKE): ETF Research Reports
 
Amplify Seymour Cannabis ETF (CNBS): ETF Research Reports
 
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