This article was originally published on ETFTrends.com.
Investors have been seeing a lot of red the past couple of days, but rising amid the Dow Jones Industrial's 1,300-point loss in the last two trading sessions are the ETFMG Alternative Harvest ETF (MJ) and cannabis stocks-- Tilray (TLRY) and Canopy Growth Corporation (CGC) . All three were up as of 1:15 p.m. ET--MJ rose 3.5%, TLRY up almost 8% and CGC ticked higher 2.8% as the Dow attempts to pare its losses this week.
Tilray, in particular, saw its valuation multiply almost tenfold thus far this year after a frenzy of investor interest last month skyrocketed its stock price to over $250 before selling off to its current level of $140. MJ, The first U.S.-listed ETF to target the cannabis and marijuana industry, is now up 23.58% year-to-date and 30.35% within the past year, according to Yahoo! Finance performance numbers.
In the past five days, as the Dow has been experiencing steep losses, MJ has largely been able to mute most of the negative effects within the capital markets as evidenced in the 5-day chart below:
Industry analysts like Vivien Azer of Cowen are expecting further gains as the “well-capitalized cannabis industry has been evolving rapidly” and “given the nascent stage of global cannabis, we believe that revenue growth should serve as the primary valuation methodology.”
Additionally, Azer cited four key verticals for growth: adult use, beauty and nutraceuticals, over-the-counter pain and sleep and pharmaceuticals.
“We believe that all four of these verticals represent large market opportunities,” said Azer.
Azer also added that market experts “are beginning to embrace the broad market potential for cannabis as a global, multi-dimensional category, given the talent migration to cannabis.”
MJ seeks to provide investment results correspond generally to the total return performance of the Prime Alternative Harvest Index, which is concentrated in the pharmaceuticals and tobacco industries. The serendipitous growth of these cannabis stocks may force large pharmaceutical companies to partner with these companies to effectively hedge against the marijuana medicine industry invading their market share, according to Tilray CEO Brendan Kennedy.
"Cannabis is a substitute for prescription painkillers, prescription opioids, and so if you're an investor in a pharmaceutical company or you're a pharmaceutical company, you have to hedge the offset from cannabis substitution," Kennedy told CNBC in an interview.
Last month, cannabis stocks received a bevy of positive news, including investment firm Morgan Stanley saying that GW Pharmaceuticals' new cannabinoid-based therapy will be a "blockbuster." Additionally, beverage giant Coca-Cola is looking to enter the marijuana industry space with purported interest in Canadian company Aurora Cannabis Inc to help stymie slowing soda sales.
In August, Constellation Brands, an international producer and beer marketer, invested $5 billion in Canopy Growth Corp. Canopy Growth hopes to parlay this capital infusion, along with a high-level management team and a high-tech distribution center, into becoming a global powerhouse in its respective market.
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