The Motley Fool

Will This Marijuana ETF Get High?

The marijuana industry has been flying high as Canada is on the verge of legalization. The Liberal government is set to announce that marijuana will be legal by Canada Day 2018.

When it comes to marijuana stocks, there’s a tug-of-war going on between the bulls and the bears. The bulls believe marijuana stocks could double again from current levels after the drug is legalized. The bears think the marijuana industry is in a bubble that’s about to get popped.

If you can stomach the volatility involved with investing in marijuana, then the rewards could be great, but there are also huge risks. Valuations have gone through the roof, drawing many similarities to the tech bubble of 1999. We’re about to see many more marijuana stocks graduate from the venture exchange to the TSX as we head into the latter part of 2017.

Marijuana stocks are nearly impossible to value right now. Traditional valuation metrics just don’t make sense at current levels, since we’re in the very early stages of an emerging industry. It can be difficult for investors to choose a single marijuana stock because not much is known about the industry at this point.

There’s also the risk of scandals that may cause a stock to dip, like the tainted marijuana concerns over at Mettrum Ltd., a subsidiary of Canopy Growth Corp. (TSX:WEED).

But there’s finally a solution for investors having difficulty choosing a stock: Horizons Medical Marijuana Life Sciences ETF will trade under the ticker symbol HMMJ on the TSX starting April 5.

The ETF will include the large Canadian companies such as Canopy Growth Corp., Aphria Inc. (TSX:APH), and Aurora Cannabis Inc. (TSXV:ACB), as well as provide exposure to companies listed on American exchanges, such as GW Pharmaceuticals PLC (NASDAQ:GWPH) and Insys Therapeutics Inc. (NASDAQ:INSY).

The ETF isn’t just investing in marijuana producers; it’s also a play on fertilizers and all the infrastructure needed to fuel the marijuana industry. Steve Hawkins, president and co-CEO of Horizons ETFs, stated, “It was very important for us to build something that was representative of the marijuana industry and that’s all the companies that have business activities in the marijuana landscape. That includes companies that are doing hydroponics and fertilizers and that.”

There’s no question that marijuana stocks are taking off, and they’re becoming increasingly popular among average investors as we get closer to nationwide legalization. If you’re thinking about investing in the marijuana industry, but you’re not quite sure where to start, then this ETF could be your one-stop shop.

Just Released! 5 Stocks Under $49 (FREE REPORT)

Motley Fool Canada's market-beating team has just released a brand-new FREE report revealing 5 "dirt cheap" stocks that you can buy today for under $49 a share.
Our team thinks these 5 stocks are critically undervalued, but more importantly, could potentially make Canadian investors who act quickly a fortune.
Don't miss out! Simply click the link below to grab your free copy and discover all 5 of these stocks now.

Claim your FREE 5-stock report now!

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Joey Frenette has no position in any stocks mentioned.

Two New Stock Picks Every Month!

Not to alarm you, but you’re about to miss an important event.

Iain Butler and the Stock Advisor Canada team only publish their new “buy alerts” twice a month, and only to an exclusively small group.

This is your chance to get in early on what could prove to be very special investment advice.

Enter your email address below to get started now, and join the other thousands of Canadians who have already signed up for their chance to get the market-beating advice from Stock Advisor Canada.