Canada Legalizes Marijuana: Stocks & ETF in Focus

Neena Mishra
Updated
Canada legalized recreational pot today but it's "sell the news" event for pot stocks that have seen astronomical gains recently.

Canada is now the first major world economy and the second country after Uruguay to legalize recreational marijuana. Medical use of marijuana has been legal in the country since 2001.

Shares of many cannabis companies, including Tilray (TLRY), Canopy Growth (CGC), Cronos (CRON), Aurora Cannabis (ACBFF) and GW Pharmaceuticals (GWPH), which have been souring over the past few months, are trading down today.

The emerging pot industry is growing fast and gaining legitimacy. Per research firm Euromonitor, the American market for legal marijuana products will reach $20 billion by 2020, up from $5.4 billion in 2015.

Many beverage giants are investing or planning to invest in cannabis. Coca-Cola (KO) is reported to be in talks with Canada’s Aurora Cannabis (ACBFF) to develop cannabidiol infused beverages. Cannabidiol is a non-psychoactive substance in marijuana that is known to have some health benefits.

Recently Constellation Brands (STZ), invested $4 billion in Canopy Growth (CGC), raising its stake to 38%.

Investors should remember that cannabis remains illegal at the federal level in the US while 30 states and the District of Columbia having legalized the use of the drug for medicinal or recreational use.

Further, marijuana stocks are extremely volatile.  These are younger and risker companies in an industry that continues to evolve.

The ETFMG Alternative Harvest ETF (MJ)--the first and only pure play US listed ETF targeting the cannabis industry--holds 37 companies that are involved in legal cultivation, production, marketing or distribution of cannabis or related products.

I talked with Jason Wilson, president of Budding Equity Asset Management in Canada and partner in MJ, in a recent podcast.

Please listen to the podcast to learn more about the outlook for pot stocks and MJ ETF.

Marijuana Stocks and ETF: What Investors Need to Know

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Constellation Brands Inc (STZ) : Free Stock Analysis Report
 
Tilray, Inc. (TLRY) : Free Stock Analysis Report
 
Cronos Group Inc. (CRON) : Free Stock Analysis Report
 
Canopy Growth Corporation (CGC) : Free Stock Analysis Report
 
ETFMG-ALT HRVST (MJ): ETF Research Reports
 
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