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Why Marijuana ETFs & Stocks Have More Room to Run

Sanghamitra Saha

Positive developments are palpable in the marijuana industry. Be it acquisitions, expansion into industries like food, beverage, tobacco and cosmetics or legalization, things are increasingly falling into place for marijuana. ETFMG Alternative Harvest ETF MJ is up 48.7% this year and appears to have more room to run.

Will FDA Regulate CBD in April?

There is growing demand for uses of CBD, a non-psychoactive ingredient in cannabis, in food, drinks and cosmetics. Naturally, companies selling food and drinks with CBD want FDA regulation for the industry. Though the U.S. FDA has forbidden companies from infusing CBD in food, many drink companies have announced plans to use it.

Congress legalized hemp products, including most CBD, in December in the 2018 Farm Bill. The FDA now has to set new rules for the industry. Amid ongoing legal uncertainty, which is causing quite an upheaval for the rising industry, FDA Commissioner Scott Gottlieb’s latest comment brought good news for the industry. He said “public meetings will be held sometime in April to hear from relevant parties on how best to regulate CBD derived from hemp,” per MarketWatch.

Marijuana for Pets Too?

Lifestyle guru Martha Stewart has teamed up with Canadian marijuana producer Canopy Growth CGC) as an adviser to help in the development and launch of a line of pot-based products for humans and animals, per Reuters.

The joining of Martha Stewart came with the deal between Sequential Brands Group Inc. SQBG (up 40% on Feb 28) and Canopy Growth (up 3.6% on the day). Sequential Brands, which is a licensing and brand management company, owns Stewart’s media company Living Omnimedia since Dec 2015.

Substantial Growth Prospect in Hemp-CBD Market

The Hemp Business Journal estimates that sales in the hemp-CBD market will shoot up from $390 million in 2018, to about $1.3 billion by 2022. As U.S. cannabis companies are still under regulatory prohibitions, Canadian operators are looking for ways to expand their reach by mergers and acquisitions, per the source. And the hemp-CBD market offers lucrative opportunities for this. This is because the 2018 Farm Bill subjects hemp and its derivatives to agricultural products category rather than controlled substances.

Canopy Growth has plans to invest between $100 million and $150 million in a hemp industrial park in New York state, per Reuters. Meanwhile, Canada's Tilray TLRY is working with Authentic Brands Group on a line of consumer products. Tilray announced an acquisition of the world’s largest hemp food maker Manitoba Harvest for about $318 million in February. Arcadia Biosciences Inc. RKDA – which normally develops food ingredients from wheat and soybeans – saw its shares jumping 49% on Feb 28 after it divulged plans to foray into the hemp industry (read: Top ETF Stories of February).

ETF & Stocks in Focus

Apart from pure-play MJ, investors can tap this growth via AdvisorShares Vice ETF ACT. Cannabis-related products occupy 25% of ACT while alcohol with cannabis exposure has 5% and tobacco with cannabis exposure has received 13% focus. The fund is up 17.2% this year (read: AdvisorShares Files for Marijuana ETF).

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Sequential Brands Group, Inc. (SQBG) : Free Stock Analysis Report
 
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ETFMG Alternative Harvest ETF (MJ): ETF Research Reports
 
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