Looking for a Canadian YOLO Play? Try This Stock

Retail investors have put cannabis stocks in their cross-hairs today. Here’s why these ETFs could soar on this sentiment.

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The demand for Cannabis ETFs continues to soar today. As a result, exchange-traded funds like Horizons Medical Marijuana Life Sciences ETF (TSX:HMMJ), The Cannabis ETF (NYSEMKT:THCX), and AdvisorShares Pure Cannabis ETF (NYSE:YOLO) are red hot. Indeed, these marijuana ETFs are drawing huge attention from social-media-savvy retail investors.

Over the past couple of months, Reddit and other retail investors have dominated the investment realm. By leveraging the power of social media platforms, Reddit investors have pushed demand for several meme stocks beyond imagination.

Indeed, the whims of retail investors have created a frenzy in certain sectors of the stock market today. Cannabis stocks and ETFs are surging, and further online attention could continue to bolster this green rush.

Here’s why HMMJ is one of those ETFs I believe is in the cross-hairs of TSX investors right now.

Pot ETFs are the new YOLO bet for investors

Speculating simply based on social media sentiment is inherently risky. However, capital flows determine a significant amount of ETF performance. With inflows into cannabis near all-time highs right now, these ETFs are poised to outperform in the near term.

Indeed, since cannabis was legalized in Canada for medicinal and recreational purposes, pot stocks and ETFs have been performing exceptionally well. Likewise, the U.S. appears to be ready to legalize marijuana. This catalyst is driving the demand for cannabis stocks and ETFs to all-time highs. Recent legalization initiatives in Washington D.C. and multiple other states of late have furthered this momentum.

HMMJ continues to be a key ETF for Canadian cannabis investors. This company has nearly doubled over the past year, posting some pretty impressive results for aggressive investors. Similarly, the AdvisorShares YOLO ETF is quickly becoming a hot favourite in the United States. In fact, it is the first actively managed pure-play ETF in the cannabis space, and it exposes investors to all leading cannabis names in the U.S. and Canada.

Marijuana ETFs: A risky bet

This speculative mania in cannabis stocks has produced some pretty incredible returns for investors. However, investing in any stock on the basis of speculation is dangerous. Foolish investors should avoid the temptation to gamble and stick to fundamentals when investing.

Thus, ETFs such as those mentioned in this article, could be more risky than holding one or two of the best quality names in the sector. I’ve got a few picks I’ve touted of late that I suggest investors follow right now.

That said, there’s incredible momentum here, so I won’t blame investors for wanting to consider a basket approach to this sector.

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 Chris MacDonald has no position in any of the stocks mentioned.

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