New Biden’s Infrastructure Bill Still Favors Cannabis Industry: in Search of Best Instrument to Get Exposure
August 12, 2021
As we recently mentioned, the new U.S. infrastructure bill surprisingly includes several sentences devoted to the controversial, but apparently gaining momentum cannabis industry. More precisely, the U.S. Senate approved the provisions aimed at allowing researchers to study the actual marijuana that consumers are purchasing from state-legal dispensaries instead of having to use only government-grown cannabis. That marks a significant development— and one of the first cannabis-related moves to come out of the Biden administration.
A separate amendment to more generally streamline research into marijuana and components like CBD by removing certain roadblocks on studies that was filed last week by a bipartisan trio of senators was not added to the bill prior to passage, however.
For those who haven’t been following this industry devotedly, it’s difficult to identify individual stories representing the best plays. Particularly, one of the most prominent member of the family, Aurora Cannabis (ACB) underperformed recently, and in fact, doesn't operate in the U.S. market and can’t become continuously profitable. This means many investors require a better tool to get the right exposure to the industry.
The Amplify Seymour Cannabis ETF (CNBS) is an actively managed cannabis ETF run by the renowned investor Tim Seymour. The fund invests directly and through derivatives in stocks of companies operating across cannabis and hemp-related industries and their components including pharmaceuticals/biotechnology, cultivation & retail, hemp products and cannabis-infused products. CNBS offers a diversified portfolio aimed at capturing the global growth opportunity. CNBS is one of the few cannabis ETFs which have employed the use of total return swaps in order to gain exposure to the US opportunity. This ETF’s expense ratio is 0.75%. Its price return over the past 12 months is +93.42%, and it has been up almost 3% over the past 5 days.
According to New Frontier Data, quarterly sales across legal medical and adult-use states reached an all-time record in Q1 2021 of $5.8 billion, with sales for Q2 2021 projected to reach $6.1 billion. Adding momentum to the new legislative steps of marijuana equities is the accelerating pace of mergers and acquisitions in the industry, where large-cap consumer giants seek to attract various lifehacks and innovations of smaller players. The New Cannabis Ventures recently published data showing that cannabis sales have jumped up in Canada on an annual basis by 73.6%.
Other peer ETFs to consider: Advisorshares Pure Cannabis ETF (YOLO) +3.79%, Advisorshares Pure US Cannabis ETF (MSOS) +3.04%, Spinnaker ETF Series The Cannabis ETF (THCX) +2.33% and Alternative Harvest ETF (MJ) +2.40%.
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