The ETFMG Alternative Harvest ETF (NYSEArca: MJ) hasn’t been immune to the sell-offs occurring in the major U.S. indexes in the month of October even as the full legalization of marijuana in Canada took place over a week ago, but MJ is hoping to end this week on a positive note as stocks continue to get roiled.
While the Dow Jones Industrial Average fell as much as 500 points in Friday’s trading session, MJ managed to eke out a gain of 0.76% as of 2:00 p.m. ET. MJ has been tracking down against the major indexes the last five days, but outperforming them within the last three months.
MJ seeks to provide investment results correspond generally to the total return performance of the Prime Alternative Harvest Index, which is concentrated in the pharmaceuticals and tobacco industries. The serendipitous growth of these cannabis stocks may force large pharmaceutical companies to partner with these companies to effectively hedge against the marijuana medicine industry invading their market share, according to Tilray CEO Brendan Kennedy.
Related: Marijuana ETF Climbs as Tilray Becomes First Canadian Company to Import Pot to U.S.
The month of September saw cannabis stocks surge after a spate of positive news flowed in, including investment firm Morgan Stanley saying that GW Pharmaceuticals’ new cannabinoid-based therapy will be a “blockbuster.” Additionally, reports surfaced that beverage giant Coca-Cola was looking to enter the marijuana industry space with purported interest in Canadian company Aurora Cannabis Inc to help stymie slowing soda sales.
Constellation Brands, an international producer and beer marketer, invested $5 billion in Canopy Growth Corp. Canopy Growth hopes to parlay this capital infusion, along with a high-level management team and a high-tech distribution center, into becoming a global powerhouse in its respective market.
“You might think that cannabis would compete with alcohol for market share, but they are really complementary areas,” an article in Money Morning noted. “Both industries serve similar needs, and both face heavy regulation and scrutiny.”
The long-term outlook for MJ and cannabis stocks still point towards the positive, according to a report by Arcview Market Research in conjunction with BDS Analytics. Per the report, the cannabis market in the U.S. is projected to hit $11 billion in consumer spending this year and more than $23 billion by the year 2022.
Furthermore, the exponential growth projected for the industry has the potential to generate more than 467,000 full-time jobs in 2022. Additionally, the report predicts that state-by-state roll-out of medical-use programs followed by adult-use legalization could result in nationwide spending in the U.S. equal to $23.4 billion in 2022–eventually growing at a 22% compound annual growth rate over a five-year period.
“The end of marijuana prohibition is in sight and what that means for this market cannot be overstated,” said Troy Dayton, CEO of the Arcview Group. “There are billions of dollars in institutional capital chomping at the bit to take advantage of this shift, but so far haven’t found a major way in. This leaves a limited window for businesses to get a foothold and build value for liquidity events that might come sooner than any of us thought possible just a few months ago.”
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