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Investing In Cannabis: Here’s What You Need to Know

Like most things, many people have something to say when it comes to the use and legality of cannabis. Some people view it as a drug that should remain illegal, while others believe it’s a natural medicine that isn’t that big of a deal. 

Two-thirds of U.S. adults, 67% to be exact, believe the use of cannabis should be made legal in the U.S., according to Pew Research Center. The number of Americans in favor of legalizing cannabis has trended upwards for decades. In 1969, just 12% of Americans believed it should be made legal. 

On the other hand, the percentage who believe cannabis should not be made legal in the U.S. is 32%. That’s a notable decline from the 52% who opposed legalization in the U.S. in 2010. 

When asked if cannabis should be legal either for medical and recreational use, 91% of U.S. adults said it should be legalized. Only 8% believe cannabis should remain illegal under all circumstances. 

Despite the widespread view that cannabis should be legalized, only 12% of U.S. adults said they smoke, according to Gallup. The number of Americans who smoke cannabis has essentially remained flat since 2015. 

Age is a large factor, with 18- to 29-year olds twice as likely to smoke as those between the ages of 30 and 64 and seven times as likely to smoke as those who are older than 65. 

Despite this, recent data shows an increase in cannabis use as COVID-19 has forced many Americans to remain confined to their homes. Cowen & Co. found that 33% of those it surveyed had tried cannabis — a record high. Cowen also cited data from cannabis analytics firm Headset Inc. that showed a spike in sales as people presumably rushed to stock up on pot before the economy came to a halt. 

The results inspired us to do a poll of our own to see how people’s smoking usage has changed as a result of being stuck at home. With more than 2,500 responses, 24% said they smoked more, 5% smoked less, nearly 8% smoked the same amount and 63% said they don’t smoke cannabis. 

So, how can you invest in the cannabis industry?

There’s certainly not a shortage of cannabis-related companies to invest in. Many of them are highly speculative as they’re being priced now for their opportunities in the future. A lot of the companies have seen their share prices come down significantly from their 2018 highs.   

Some of the largest companies by market cap. in the sector include Canopy Growth Corp (CGC), Arena Pharmaceuticals (ARNA), Aurora Cannabis Inc (ACB), Cronos Group Inc (CRON), GW Pharmaceuticals PLC (GWPH) and Tilray Inc (TLRY). 

The best way to have exposure to the cannabis sector is to do so through an ETF, so you can eliminate having to pick individual companies. There’s also quite a few cannabis-related ETFs, which mostly hold the same companies, including the ones previously listed. 

The ETFMG Alternative Harvest ETF (MJ) was the first ETF to target the global cannabis industry and is currently the largest by AUM. The ETF has an expense ratio of 0.75% and holds a basket of 37 companies with exposure to the “cannabis ecosystem.” The largest holdings, accounting for nearly a quarter of the ETF, are Cronos Group, GW Pharmaceuticals and Canopy Growth. 

As the younger generation has a much more favorable view towards cannabis than older generations, having some exposure to companies that could benefit from this shift in your portfolio may not be a bad idea.  

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