Best Marijuana ETFs for Q4 2021

Marijuana exchange-traded funds (ETFs) provide investors with exposure to equities of companies that engage in the cultivation, distribution, and sale of marijuana and related products. Products of marijuana companies include dried flowers, oils, seeds, edibles, and more.

Still prohibited as an illegal substance in many parts of the world, marijuana is gaining wider acceptance for both medicinal and recreational purposes. Support for continued legalization is growing, and cannabis is now a multibillion-dollar industry. Marijuana ETFs are a straightforward way for investors to gain exposure to a diversified basket of marijuana equities and profit from this growing industry.

Key Takeaways

  • Marijuana equities have significantly underperformed the broader U.S. equity market over the past year.
  • The marijuana exchange-traded funds (ETFs) with the best one-year trailing total return are CNBS, YOLO, and THCX.
  • The top holding of the first ETF is WM Technology Inc., and the top holding of the other two is Village Farms International Inc.

Six marijuana ETFs trade in the United States, excluding inverse and leveraged ETFs as well as funds with less than $50 million in assets under management (AUM). The marijuana sector, as measured by the Marijuana Index (North America), has dramatically underperformed the broader U.S. stock market over the past 12 months, with a total return of -2.1% compared to the S&P 500’s total return of 36.3% as of Aug. 3, 2021. The Marijuana Index is an equal-weighted index, which means that it may significantly overweight small-cap equities relative to a cap-weighted index like the S&P 500. The best-performing marijuana ETF, based on performance over the past year, is the Amplify Seymour Cannabis ETF (CNBS).

We examine the three best marijuana ETFs below. All numbers are as of Aug. 3, 2021.

Amplify Seymour Cannabis ETF (CNBS)

  • Performance Over One-Year: 84.9%
  • Expense Ratio: 0.75%
  • Annual Dividend Yield: 0.44%
  • Three-Month Average Daily Volume: 90,882
  • Assets Under Management: $135.4 million
  • Inception Date: July 23, 2019
  • Issuer: Amplify Investments

CNBS is an actively managed ETF that provides exposure to the cannabis industry by investing at least 80% of its assets in securities of companies that generate 50% or more of their revenue from the cannabis and hemp ecosystem. The majority of the fund’s holdings operate within either the cultivation and retail or agricultural technology sectors of the cannabis market, though investing and finance companies also garner a sizable representation. Most of its holdings are based in either the United States or Canada, but a portion of the portfolio is based in Ireland and a small fraction in Israel.

CNBS follows a blended strategy, investing in a mix of growth and value stocks of mostly mid-cap and small-cap companies. The fund’s top three holdings are WM Technology Inc. (MAPS), a provider of software and technology solutions to the cannabis industry; Tilray Inc. (TLRY), a Canada-based provider of medical cannabis; and Canopy Growth Corp. (CGC), a Canada-based medical marijuana producer.

AdvisorShares Pure Cannabis ETF (YOLO)

  • Performance Over One-Year: 61.4%
  • Expense Ratio: 0.75%
  • Annual Dividend Yield: 0.58%
  • Three-Month Average Daily Volume: 142,889
  • Assets Under Management: $310.7 million
  • Inception Date: April 17, 2019
  • Issuer: AdvisorShares

YOLO is an actively managed ETF that seeks long-term capital appreciation by investing in both domestic and foreign cannabis equities. The fund is heavily weighted to mid-cap equities primarily in the United States and Canada. But it also provides exposure to companies based in the United Kingdom and a small fraction in Israel. Its holdings span multiple areas of the cannabis market, including agriculture, biotechnology, pharmaceutical, and more.

YOLO is designed to take advantage of growth in the cannabis industry over the long term and may be ideal for a buy-and-hold portfolio. The fund’s top three holdings are Village Farms International Inc. (VFF), a Canada-based grower of tomatoes, bell peppers, cucumbers, and cannabis; Innovative Industrial Properties Inc. (IIPR), a real estate investment trust (REIT) focused on the cannabis industry; and Green Thumb Industries Inc. (GTBIF), a manufacturer and distributor of branded cannabis products.

The Cannabis ETF (THCX)

  • Performance Over One-Year: 48.3%
  • Expense Ratio: 0.75%
  • Annual Dividend Yield: 1.32%
  • Three-Month Average Daily Volume: 73,054
  • Assets Under Management: $132.1 million
  • Inception Date: July 9, 2019
  • Issuer: Mcivy Co. LLC

THCX tracks the Innovation Labs Cannabis Index, which consists of global companies engaged in the legal cannabis, hemp, or cannabidiol (CBD)-based pharmaceutical, consumer product, and wellness markets. The ETF was designed to provide a convenient way for investors to gain exposure to a basket of stocks expected to benefit from growth in the hemp and legal marijuana industries.

All of the fund’s holdings are based in the United States and Canada. It is heavily weighted to the pharmaceuticals and biotech sector, and it follows a blended strategy of investing in a mix of value and growth stocks. The fund’s top three holdings are Village Farms International, Tilray, and Canopy Growth, all described above.

The comments, opinions, and analyses expressed herein are for informational purposes only and should not be considered individual investment advice or recommendations to invest in any security or adopt any investment strategy. While we believe the information provided herein is reliable, we do not warrant its accuracy or completeness. The views and strategies described in our content may not be suitable for all investors. Because market and economic conditions are subject to rapid change, all comments, opinions, and analyses contained within our content are rendered as of the date of the posting and may change without notice. The material is not intended as a complete analysis of every material fact regarding any country, region, market, industry, investment, or strategy.

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