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High Times: The Marijuana ETF Soars To Start 2019

ETF Professor

After slumping in the fourth quarter, the ETFMG Alternative Harvest ETF (NYSE: MJ), the only dedicated cannabis exchange traded fund listed in the United States, is off to a scintillating start in 2019.

MJ is up 22.69 percent since the start of 2019, making it the best-performing non-leveraged ETF in January.

What To Know

Year-to-date, just 36 U.S.-listed ETFs are up at least 20 percent and MJ is the only member of that group that is not an inverse or leveraged fund. MJ slumped nearly 22 percent in 2018 with much of those losses contained to the fourth quarter despite a slew of positive post-Election Day news pertaining to increased legalization of marijuana across the U.S.

MJ's rally to start 2019 has the ETF residing almost 6 percent above its 50-day moving average and close to reclaiming its 200-day moving average.

Related Link: 4 Cannabis Investors Share Their Predictions For Industry's Future

Why It's Important

MJ targets the Prime Alternative Harvest Index and is home to 37 stocks. The fund is top heavy as just four stocks -- Cronos Group Inc. (NASDAQ: CRON), Canopy Growth Corp. (NYSE: CGC), Aurora Cannabis Inc. (NYSE: ACB) and Tilray, Inc. (NASDAQ: TLRY) –- combine for over 36 percent of the fund's weight.

Cronos Group, MJ's largest holding at 13.65 percent, is up nearly 31.5 percent to start 2019. While that stock and other MJ holdings dipped a bit earlier this week amid speculation attorney general nominee William Barr would be hard on legal marijuana, it appears Barr's stance is softer than previously thought.

“Barr said he would not go after marijuana companies that have operated in compliance with earlier Justice Department guidance that was rescinded last year by his predecessor, Jeff Sessions,” reports Marijuana Moment.

While about two-thirds of Americans have access to legal medical marijuana, the long-term growth driver for MJ is expected to be increased legalization, particularly on the recreational front. Ten states and the District of Columbia have legalized marijuana for recreational use by adults.

Related Link: 'The Rest Of The World Is Moving Very Quickly': Cannabis Execs Tackle Global Market Opportunity

What's Next

Cash-strapped states such as Connecticut, Illinois and New Jersey, as well as Minnesota, New Hampshire, New Mexico, New York and Rhode Island could take up measures to legalize cannabis this year.

As has been seen during previous MJ rallies, investors are gravitating to the marijuana fund. Since the start of 2019, MJ has added $51.54 million in new assets, a decent percentage of its $761.59 million in assets under management.

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