A Strong Start to 2019 for Marijuana ETF
This article was originally published on ETFTrends.com.
The ETFMG Alternative Harvest ETF (MJ) is off to a strong start in 2019, gaining 21 percent year-to-date.
Like most U.S. equities, MJ got racked by the volatility in November and especially December as the ETF fell below its 200-day moving average. However, looking at the 6-month chart, MJ appears to be recovering as it creeps back to its 200-day MA.
As the major indexes were slightly down, MJ posted gains of 4 percent on Friday.
MJ and its cannabis stock holdings experienced exponential growth in 2018 and could see more of the same in 2019. Neal Gilmer, a research analyst with Haywood Securities, is projecting that the US cannabis market could be worth between US$15.9 and US$21.7 billion by the year 2022.
“We remain positive on the cannabidiol (CBD) market and believe that CBD could be removed from its Schedule I classification driving further adoption across the US and likely driving solid interest and investments from companies outside of the cannabis sector,” Gilmer wrote in a research note.
Related: Marijuana ETF Boosted by Altria, Cronos Cannabis Rumor
Second Marijuana ETF in the Works
In 2019, MJ may not be the only ETF on the market that caters to the marijuana industry in the U.S. capital markets for much longer as Innovation Shares LLC recently filed with the Securities and Exchange Commission to launch the Innovation Shares Cannabis ETF. The filing couldn’t be more auspicious as recent regulatory changes have been paving the way for more marijuana usage whether it's medical or recreational.
According to the Innovation Shares filing, the ETF will be based on a proprietary index that tracks “the performance of a portfolio of exchange listed common stock of companies in primarily the United States and Canada that have a business interest in to the legal cannabis, hemp or CBD-based (i.e., products that contain cannabidiol) pharmaceutical and consumer wellness & product markets. A company has a business interest in the legal cannabis, hemp or CBD-based pharmaceutical and consumer wellness & product markets if a significant percentage of its revenues are
Furthermore, companies for inclusion in the index are “screened to not include stocks that have a market capitalization below $100 million. Constituents must also have traded at least 200,000 shares during the month of reconstitution. At the time of monthly reconstitution, the Index constituents are weighted according to their market capitalization with the individual weight of an Index constituent capped at seven percent (7.00%), with the excess weighting proportionately distributed between the remaining constituents.”
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