During the last month, we have noticed a major divergence as it relates to performance of US multi-state operators (MSOs) and the Canadian Licensed Producers (LPs). This is a trend that caught our attention as Canadian LPs have outperformed US MSOs during the last month.
When comparing the performance of ETFMG Alternative Harvest ETF (MJ) and AdvisorShares Pure US Cannabis ETF (MSOS) in March, the gap between the two indices has widened and we believe our readers need to be aware of this trend. The MJ ETF is composed of Canadian LPs while MSOS is composed of US cannabis companies and we like to use these indices as a barometer for the performance of each vertical.
In March, the US index recorded a double-digit percentage decline while the Canadian index traded slightly higher. We find the divergence of the performance of the indices to be significant since the gap between the two funds was previously narrowing.
One of the most significant recent developments in the US cannabis industry is the legalization of recreational cannabis in New York. This comes as the state faces a stressed balance sheet which can be attributed to the COVID pandemic. Based on the population of New York, we expect the opening of the recreational market to serve as a substantial growth driver for the companies that are levered to it.
In regards to the Canadian cannabis market, the industry has benefited from the growth on the international side of the business. When it comes to emerging international opportunities, we are highly focused on the Mexican cannabis market. In the coming months, we expect the country to legalize recreational cannabis and several Canadian cannabis are highly focused on this opportunity.
Going forward, we believe the global cannabis market is reaching an inflection point. Over the next year, we expect countries like Germany and Mexico to legalize recreational cannabis markets. During this time, we expect several countries in the European Union (EU) to legalize medical cannabis and are bullish on how this aspect of the industry has advanced.
The recent divergence has caught our attention and we will monitor how the Canadian and the US sectors perform as leading cannabis operators like Aphria (APHA.TO) (APHA), Tilray (TLRY), and Aurora Cannabis (ACB.TO) (ACB) get set to report quarterly financial results.
If you are interested in learning more about the performance of the Canadian and the US cannabis sectors, please send an email to firstname.lastname@example.org with the subject “North American Cannabis Market” to be added to our distribution list.
*Techincal420 owns multiple positions in MSOS and MJ.