With the coronavirus pandemic causing stress levels to rise and shutdowns of other entertainment outlets, data suggest some folks are indulging in cannabis, a trend that could benefit ETFs, including the Global X Cannabis ETF (NASDAQ: POTX).
POTX, the first cannabis fund from Global X follows a benchmark that holds “companies involved in the legal production, growth, and distribution of cannabis and industrial hemp, as well as those involved in providing financial services to the cannabis industry, pharmaceutical applications of cannabis, cannabidiol (i.e., CBD), or other related uses including but not limited to extracts, derivatives or synthetic versions,” according to Global X.
Cannabis ETFs are struggling on a year-to-date basis, but over the past 90 days, POTX is higher by more than 13%, indicating that there’s something to the notion of a coronavirus cannabis lift.
“Consumers are buying record amounts of cannabis amid the Covid-19 pandemic, according to the chairman of Curaleaf Holdings Inc.,” reports Tiffany Kary for Bloomberg. “July is shaping up to be another record, even before the acquisition is factored in,” said Curaleaf Chairman Boris Jordan.
Cannabis Catalysts
A slew of new markets, including health and wellness, oil extracts, tinctures, topicals, and capsules, are opening up for cannabis producers. Plus, some POTX components are poised to benefit from increased marijuana consumption – medicinal and recreational – thanks to coronavirus shelter in place directives.
“There’s been a wave of increased cannabis sales since the pandemic began, industry data show. Sales so far this year are approaching $4 billion according to BDS Analytics. While sales declined slightly in April after a March bump related to stockpiling in quarantine, they trended upwards again in May, surpassing March’s numbers,” according to Bloomberg.
The cannabis industry is just beginning to germinate. Deemed an “essential business” in many U.S. states and Canadian provinces during the COVID-19 pandemic, the space has seen an uptick in investor interest over the past several weeks.
The global cannabis market is expected to grow to $630 billion by 2040, compared to $12 billion today. The cannabis industry is expected to expand into a $22 billion hemp-derived CBD product market in 2022, up from $591 million in 2018. Looking ahead, Canada’s cannabis industry is projected to grow six-fold in market value by 2026, up from $1.6 billion in 2018.
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The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.