Medical Marijuana ETF To Debut Soon

It is often said in the exchange traded funds (ETFs) business that “all of the good ideas are taken.” Well, maybe not. The legal marijuana industry is booming in the U.S. and, as of now, there is not a dedicated ETF that investors can tap to play that trend.

That could change as ETF Managers Group (ETFMG), a New Jersey-based company that helps ETF sponsors bring their products to market, has filed plans for the Emerging AgroSphere ETF. Assuming the Emerging AgroSphere ETF comes to life, it will track an index created by BE Asset Management.

That index "tracks the performance of the exchange-listed common stock (or corresponding American Depositary Receipts (“ADRs”) or Global Depositary Receipts (“GDRs”)) of companies across the globe that (i) engage in lawful medical research intended to lead to the production of government-approved prescription drugs which utilize natural or synthetic versions of the cannabidiol CBD and other cannabis-based extracts, (ii) are involved in the production or sale of products which are legal derivatives of industrial hemp, or (iii) are involved in the supply chain of either category of company. The Fund will not invest in any companies that are focused on serving the non-medical marijuana market in the United States, Canada or any other country unless and until such time as the production and sale of non-medical marijuana becomes legal in the United States, Canada or such other country, respectively," according to a filing with the Securities and Exchange Commission (SEC).

Interested investors should note that Emerging AgroSphere ETF, again assuming it hits the market, will focus on medical marijuana. That means the ETF will not be a play on the highly lucrative recreational marijuana markets that are popping up across the U.S. Colorado is generating handsome tax revenue from legal recreational marijuana and the same could hold true for other states in the future. For example, during the 2016 elections, Californians voted to legalize marijuana for recreational use, and the largest U.S. state by population will see its first recreational pot stores open in 2018.

"Currently, 28 states plus the District of Columbia have laws and/or regulations that recognize, in one form or another, legitimate medical uses for cannabis and consumer use of cannabis in connection with medical treatment," according to the ETFMG filing with the SEC. "Even in those states in which the use of medical marijuana has been legalized, its sale and use remains a violation of federal law."

The filing did not contain a proposed ticker or expense ratio for the marijuana ETF. Those are often signs that a new ETF is close to coming to market, so it could be a while before investors can access the Emerging AgroSphere ETF.

By Todd Shriber

Source: http://www.investopedia.com/news/maybe-medical-marijuana-etf/

Marijuana Stocks: Plenty of Business Diversity, Yet One Common Theme

Marijuana, excuse the pun, has been growing like a weed for some time now. Just 21 years after California became the first state to legalize cannabis for medical purposes, there are now a total of 28 states that have legalized medical marijuana. Likewise, just a little over four years after voters in Washington and Colorado voted to legalize recreational pot, eight states in total have done so.

Marijuana's blazing growth

One reason cannabis has been gaining such rapid momentum in the U.S. is the improving opinion of pot among the general public. National pollster Gallup has been conducting surveys on marijuana for nearly five decades, and the percentage of the public that'd like to see it legalized nationally has increased from just 25% in 1995 to 60% (an all-time high) in 2016. As favorability toward the drug improves, more and more states have been legalizing pot either for medical or recreational uses.

Image source: Getty Images.

governments have played their role, too. Legally growing and selling marijuana provides new channels of revenue for state governments to collect taxes and licensing fees. In Colorado, $135 million in tax and licensing revenue was collected in 2015 on $996.2 million in legal weed sales, while in California, the passage of Prop 64 this past November (which legalized recreational pot) is expected to add an estimated $1 billion in tax revenue to the state.

Lastly, the significant growth potential behind marijuana has been an allure. Legal marijuana sales hit $6.9 billion in 2016 according to cannabis research firm ArcView, a 34% increase from the previous year. ArcView believes this figure could grow to $21.6 billion by 2021, while investment firm Cowen & Co. believes legal pot sales could tip the scales at $50 billion by 2026.

Marijuana stocks offer plenty of business diversity

This latter point is what's attracted a flurry of marijuana companies to go public in recent years, giving investors a veritable sea of marijuana stocks to choose from.

One thing marijuana stocks definitely don't lack is business diversity, offering investors a lot of ways to potentially capitalize on marijuana's growth.

Image source: GW Pharmaceuticals.

Perhaps the most well-known cannabis stock is cannabinoid-based drug developer GW Pharmaceuticals (NASDAQ: GWPH) . GW Pharmaceuticals has discovered more than five dozen different cannabinoids from the cannabis plant, and it uses these cannabinoids to access the natural CB receptor system in our bodies. Easily the most successful experimental drug to date in GW's portfolio is Epidiolex, a cannabidiol-based drug that met its primary endpoint in phase 3 studies for two types of childhood-onset epilepsy, Dravet syndrome and Lennox-Gastaut syndrome.

Along those same lines, Medical Marijuana (NASDAQOTH: MJNA) licenses its cannabinoid testing and research to the medicinal cannabinoid industry. Medical Marijuana also provides management and consulting services, as well as chewing gum-based cannabis products.

But there are numerous pot stocks outside the biotech realm. Right now there are companies that are:

• Developing marijuana breathalyzer devices for law enforcement;
• Focused on consulting services for pot businesses;
• Manufacturing THC-infused beverages and foods;
• Providing banking solutions to marijuana companies;
• Developing cloud-based technology to run point-of-sale and ordering systems for pot retailers;
• Providing marketing services;
• Leasing cultivation space and facilities;
• Developing new and innovative lighting products for indoor grow farms.

This list could go on for quite some time. The point is that retail sales from dispensaries are far from the only way marijuana businesses are looking to take advantage of legal sales growth.

Image source: Getty Images.

Marijuana stocks share one common theme

Unfortunately, despite this business diversity, marijuana stocks do share something in common: they're basically all losing money, and there's nothing to suggest that this money-losing trend will ebb anytime soon.

Some investors might be quick to point to INSYS Therapeutics (NASDAQ: INSY) , a profitable stock commonly called a "marijuana stock", to debunk this thesis. However, INSYS generated essentially all of its $55.2 million in sales during the third quarter from a sublingual drug known as Subsys, which isn't marijuana-based. It's not exactly fair to refer to Insys as a marijuana stock until it generates a decent percentage of its sales from its dronabinol-based medicines.

Nasdaq Cannabis Stocks Rally After Recreational and Medical Use Passes

Cannabis stocks listed on the Nasdaq continued to rally after voters ended prohibition and approved the recreational use of marijuana in California, Massachusetts, Maine and Nevada.

Cannabis stocks listed on the Nasdaq continued to rally on Wednesday after voters ended prohibition and approved the recreational use of marijuana in California, Massachusetts, Maine and Nevada while Arkansas, Florida and North Dakota adopted medical marijuana laws.

Arizona rejected its measure for recreational use while Montana voters approved a measure to improve access to medical marijuana providers.

"Whether they live in blue or red states, voters have spoken in an overwhelming majority that they want media and recreational marijuana," said Jason Spatafora, co-founder of Marijuanastocks.com and a Miami-based trader and investor known as @WolfofWeedST on Twitter. "One election night we witnessed not just a political shift, but a paradigm shift for cannabis where prohibition has become untenable."

Interest in cannabis-related stocks continues to increase from micro cap to Nasdaq-listed equities and will only continue its upward trend as investors should be poised for several decades of additional expansion as more states legalize either recreational or medical use and could emerge as acquisition targets.

"The legal cannabis movement scored its most significant victory yet," said Michael Berger, a former Raymond James energy analyst and founder of Technical420, a Miami-based company that conducts research on cannabis stocks. "Although the results of the election will be a turning point for the legal cannabis industry, we are only in the first inning of what will be a multi-decade growth cycle. As legalization measures continue to go into effect, market sentiment will improve for cannabis stocks and this should serve as a catalyst for many companies."

The economic impact for these states is immense - California is estimated to increase to $10 billion market by 2020, while Florida's medical market should be a $1 billion industry by 2020, he said.

"I expect the cannabis industry to be a $75 billion dollar industry by 2020," Berger said. "Although many people's estimates are below this, I take into account more than just the sale legal cannabis because the ancillary business will benefit significantly."

Several stocks have been undervalued as investors were skittish and the use of drugs produced by major cannabis-focused biopharmaceutical companies have not been widely adopted. The current options for mainstream investors in this budding sector are limited to a handful of companies listed on the Nasdaq, including GW Pharmaceuticals (GWPH) , a U.K.-based biotech company with a cannabis-based epilepsy drug; Insys Therapeutics (INSY) , a Phoenix company known for its cancer pain management drug but is developing a cannabis-based drug for the treatment of epilepsy; Cara Therapeutics (CARA) , a Shelton, Conn.-based clinical state biopharmaceutical company that develops and commercializes pain relief drugs and Zynerba Pharmaceuticals (ZYNE) , a Devon, Pa.-based company focused on developing and commercializing synthetic cannabinoid therapeutics.

Being undervalued means many of these companies such as Cara, Zynerba and GW Pharmaceuticals are also attractive acquisition targets, said Spatafora. All three companies are appealing candidates because of their intellectual property and their pipeline of current and upcoming drugs.

"The intellectual property for GW Pharmaceuticals is based on having cannabis plant-based drugs rather than synthetic alternatives and in my estimate is worth $6 billion or roughly $190 per share if bought out," he said.

Since GW Pharmaceuticals is the bellwether company of the cannabis industry and tends to benefit from positive developments in the sector, the stock could be poised for headwinds as a result from the increased market volatility.

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"We continue to view GW Pharmaceutical as the best long-term cannabis investment due to its deep pipeline of products, its successful FDA testing results, its Wall Street coverage and its valuation as its shares are trading well below the average Wall Street price target," said Berger. "We continue to view GWPH as a buy opportunity on weakness from today."

While there is less research available from analysts, some cannabis stocks listed on the OTC are also worth consideration, because they will benefit from the laws that passed in Florida, Nevada and California, Spatafora said.

Florida's adoption of medical marijuana use could be advantageous for Arcturus Growthstar Technologies (AGSTF) , which entered into a letter of intent to purchase a Florida farm that is zoned for cannabis. The state currently has six licensed producers and expansion will be needed to meet "massive demand," he said.

"They hedged on the LOI to wait and see if the law passed," Spatafora said. "The company was pretty wise in this potential acquisition because the farm already produces $2.6 million in revenue annually."

With Nevada voters approving adult use of cannabis, mCig Inc. (MCIG) , which used to specialize in lifestyle brands in the vaping and cannabinoid markets, could benefit. The company founded a construction division called Scalable Solutions geared toward the Nevada cannabis cultivation market.

Nasdaq Cannabis Stocks Spike in Volume Ahead of Election for Recreational and Medical Use

The volume of cannabis stocks listed on the Nasdaq have spiked ahead of the election as voters decide tomorrow on recreational and medical use of marijuana.

 

The volume of cannabis stocks listed on the Nasdaq have spiked ahead of the election with some stocks rising as much as 12% on Monday as voters decide tomorrow whether five states will allow recreational use of marijuana while four other states could approve medical use.

Interest in cannabis-related stocks has risen from micro cap to Nasdaq-listed equities, said Jason Spatafora, co-founder of Marijuanastocks.com and a Miami-based trader and investor known as @WolfofWeedST on Twitter. The market is predicting that voters in California and Nevada will approve legislation for recreational use and anticipates that Florida will legalize medical use.

"Should more states adopt laws to legalize either recreational or medicine use of marijuana, we can see a continued run going into the new year," he said.

Some of the stocks have been undervalued as investors were skittish and the use of drugs produced by major cannabis-focused biopharmaceutical companies have not been widely adopted. The current options for mainstream investors in this budding sector are limited to a handful of companies listed on the Nasdaq, including GW Pharmaceuticals (GWPH) , a U.K.-based biotech company with a cannabis-based epilepsy drug; Insys Therapeutics (INSY) , a Phoenix company known for its cancer pain management drug but is developing a cannabis-based drug for the treatment of epilepsy; Cara Therapeutics (CARA) , a Shelton, Conn.-based clinical state biopharmaceutical company that develops and commercializes pain relief drugs; and Zynerba Pharmaceuticals (ZYNE) , a Devon, Pa.-based company focused on developing and commercializing synthetic cannabinoid therapeutics.

This run in stock prices is also boosted by the massive gains that Canadian licensed producers are showing investors, Spatafora said. Canada is also expecting several IPOs such as Emblem Cannabis (TSX: EMC) which is expected to which will go public end of November.

"The Canadian run can prop up the U.S. market well into the spring when their national cannabis law takes effect," he said. "So long as investors are taking profit along the way rather than let greed dominate their accounts, the bubble will not burst."

An approval in Florida means the state's economy would benefit, because "cannabis has a drastic impact on real estate since entrepreneurs need legal means other than cash vaults to store their earnings due to banking restrictions," Spatafora said. "This could inevitably be a residual benefit of cannabis passage that most people are missing."

Recreational passage in California will have a smaller effect on them market since it is already a medical state which currently consists of about 75% of the total U.S. cannabis market, he said. The other states seeking approval are Arizona, Nevada, Massachusetts and Maine.

"Passage in California will only expand those numbers, but the more interesting state is Florida," Spatafora said.

Colorado's passage of both recreational and medical use in 2014 proved to be a groundbreaking test case for entrepreneurs and legislators and has generated hundreds of millions of revenue in taxes.

"The state was a crash test dummy of the industry and for all the doomsayers who said crime would increase as well as drug abuse," he said. "Colorado was a wild success with opioid addiction and overdoses dropping. Two or three states after legalization have shown states that the paradigm shift for legal cannabis has already reached a tipping point and their economies need it."

The economic impact for these states is immense - California is estimated to increase to $10 billion market by 2020, while Florida's medical market should be a $1 billion industry by 2020, said Michael Berger, a former Raymond James energy analyst and founder of Technical420, a Miami-based company that conducts research on cannabis stocks. California's recreational market is not likely to start until 2018 since Colorado voters passed the usage in 2012 and the program did not start until January 1, 2014.

"I expect the cannabis industry to be a $75 billion dollar industry by 2020," he said. "Although many people's estimates are below this, I take into account more than just the sale legal cannabis because the ancillary business will benefit significantly."

The medical marijuana initiatives are being voted on Arkansas, Florida and North Dakota while Montana is voting on an initiative to "fix the medical marijuana program after it was gutted by the legislature several years ago," said Morgan Fox, communications manager for the Marijuana Policy Project, a Washington, D.C.-based marijuana policy reform organization.

In California alone, the state and local revenues are expected to generate over $1 billion annually, according to an analysis from the nonpartisan Legislative Analyst's Office, said the Marijuana Policy Project of California. State and local governments could save $100 million annually from lower costs been allocated for enforcing marijuana-related offenses such as legal and incarceration costs.

Future State Legislation

Ballot initiatives are not likely to occur in 2017, since it is an off-cycle election year, but movement could occur in Rhode Island, Vermont and New Jersey at the statehouse level next year, said Robert Hunt, president of Teewinot Life Sciences, a Tampa, Fla.-based cannabinoid biosynthesis company, and a partner at Tuatara Capital, a New York-based private equity fund dedicated to the legal cannabis industry.

State legislatures who chose to expand a program do not need voter approval and it is likely more legislators will choose this strategy in 2017 and 2018, said Brett Roper, COO of Medicine Man Technologies (OTCQB: MDCL), a Denver-based cannabis consulting services company.

"I predict that in 2017 and 2018 instead of straight ballot initiatives, we will see the first states pass adult use legalization through legislatures," he said. "Vermont and Rhode Island have long been a favorite picks of observers for being the first to legalize through a legislative process and there has been some movement in New Jersey that has also been encouraging."

Well-regulated medical cannabis or adult use state markets can usually generate at least 10% of total sales, Hunt said.

"The total economic impact when accounting for direct and ancillary job creation is often in the billions of dollars in states with a decent sized population," he said. "We are already seeing this in the earliest adopting states with robust markets."

By Ellen Chang

Source: https://www.thestreet.com/story/13883955/1/nasdaq-cannabis-stocks-spike-in-volume-ahead-of-election-for-recreational-and-medical-use.html