Best Marijuana ETFs for Q4 2020

Investing

Marijuana exchange-traded funds (ETFs) provide investors with exposure to equities of companies that engage in the cultivation, distribution, and sale of marijuana and related products. Products of marijuana companies include dried flowers, oils, seeds, edibles, and more. Still prohibited as an illegal substance in many parts of the world, marijuana is gaining wider acceptance for both medicinal and recreational purposes. Support for continued legalization is growing, and cannabis is now a multi-billion industry. Marijuana ETFs are a straightforward way for investors to gain exposure to a diversified basket of marijuana equities and profit from this growing industry.

Key Takeaways

  • Marijuana ETFs significantly underperformed the broader U.S. equity market over the past year.
  • The ETFs with the best 1-year trailing total return are YOLO, TOKE, and CNBS.
  • The top holding of the first of these ETFs is Village Farms International, and the top holding for both of the other two ETFs is GW Pharmaceuticals.

The marijuana ETF universe is comprised of 7 ETFs, excluding inverse and leveraged ETFs. Marijuana ETFs have dramatically underperformed the broader U.S. equity market. The S&P 500’s total return over the past 12 months is 14.3%, as of September 10, 2020.  The best-performing marijuana ETF for Q4 2020, based on performance over the past year, is the AdvisorShares Pure Cannabis ETF (YOLO). We examine the top 3 best marijuana ETFs below. All numbers below are as of September 11, 2020.

ETFs with very low assets under management (AUM), less than $50 million, usually have lower liquidity than larger ETFs. This can result in higher trading costs which can negate some of your investment gains or increase your losses.

  • Performance over 1-Year: -34.9%
  • Expense Ratio: 0.74%
  • Annual Dividend Yield: 7.75%
  • 3-Month Average Daily Volume: 71,888
  • Assets Under Management: $59.8 million
  • Inception Date: April 17, 2019
  • Issuer: AdvisorShares

YOLO seeks to provide long-term capital appreciation by investing in cannabis equity securities. It holds stocks of both domestic and foreign companies, but is primarily focused on those located in the U.S. and Canada. It also focuses on companies that specialize in offering consumer cannabis products. The ETF follows a blended strategy, investing in both value and growth stocks with various market capitalizations. The fund holds a relatively large share of cash as a percentage of total assets, at 27.2%. Aside from that cash component, the fund’s top three equity holdings include Village Farms International Inc. (VFF), a company that operates agricultural greenhouse facilities and raises various produce; Innovative Industrial Properties Inc. (IIPR), a real estate investment trust (REIT) focused on industrial properties leased to tenants in the cannabis industry; and GW Pharmaceuticals PLC (GWPH), a biopharmaceutical company that develops novel therapeutics.

  • Performance over 1-Year: -44.7%
  • Expense Ratio: 0.42%
  • Annual Dividend Yield: N/A
  • 3-Month Average Daily Volume: 8,900
  • Assets Under Management: $12.3 million
  • Inception Date: July 25, 2019
  • Issuer: Cambria

TOKE seeks to offer capital appreciation through investments in global equity markets exposed to the cannabis industry. The company targets between 20 to 50 marijuana companies within a market-cap spectrum spanning micro-, small-, and mid-cap stocks. Close to half of the securities held are of companies based in the U.S., while the rest are either based in Canada or in Britain. The ETF follows a blended strategy, investing in both growth and value stocks. Its top holdings include GW Pharmaceuticals; Aphria Inc. (APHA), a producer of medical cannabis; and Constellation Brands Inc. (STZ), a producer of alcoholic beverages that also owns stakes in cannabis projects.

  • Performance over 1-Year: -46.5%
  • Expense Ratio: 0.75%
  • Annual Dividend Yield: 0.65%
  • 3-Month Average Daily Volume: 4,842
  • Assets Under Management: $5.8 million
  • Inception Date: July 23, 2019
  • Issuer: Amplify

CNBS seeks to provide investors with exposure to the global cannabis industry. At least 80% of its holdings are invested in companies that generate 50% or more of their revenue from the cannabis and hemp market. The ETF invests in a basket of equities across the market-cap spectrum, from micro-cap to large-cap stocks. Over half of its assets are part of either the cultivation & retail or pharmaceuticals/biotechnology segments of the marijuana industry. The fund invests in both growth and value stocks. Its top three holdings include GW Pharmaceuticals; Canopy Growth Corp. (CGC), a producer of medical cannabis; and Innovative Industrial Properties.

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