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Marijuana ETF - HMMJ

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#1 ·
This Horizons ETF (HMMJ) launched yesterday and is the first marijuana ETF in the world! It holds mostly Canadian marijuana related stocks, capped at 10% each. Thoughts?

The fact it's a new sector is intriguing, I'll admit, though all the stocks in it are very high risk. I'm tempted to buy 100 shares as a lottery ticket, purely as a ponzi/bubble play in case tons of money pours into the sector and sparks a bubble.
 
#31 ·
I spend lots of time in Oregon & Washington states, where weed is "legal". But the fact it's still a federal crime makes a big difference. People are hesitant to buy marijuana at shops because they have to show their IDs and will be recorded. For example I would never buy weed even in these legal jurisdictions, because I could still get in federal trouble.

Truly legal marijuana in Canada is going to be much different than state-by-state legality in the US
 
#33 ·
...and everyone called me an idiot for solely focusing on this sector last summer/fall (Humblepie). Portfolio is up about 300% since last August thanks to these stocks.

Some thoughts from someone who has watched this sector day in and day out since last summer...

The easy money has been made. Now that legislation has been tabled, there are no major known catalysts in sight. We witnessed the usual buy the rumour, sell the news event regarding legislation. Will prices be much higher a year from now? Absolutely (assuming no major broad market pullback). However, with no major catalysts in the near term, for the first time since last summer I fully believe the stock prices will slowly bleed down over the summer.

Personally, I will be waiting for prices to settle down to more reasonable levels, and re-enter with longer term positions in a few months (probably at the end of summer). It's obvious to me that with the type of hype we've seen in this sector to date, that when legislation is actually passed and rec becomes legal sometime next year... we will see more hype than ever. So if you bought today and plan to hold for the next couple of years, I think it's a pretty safe bet prices will be much higher... however I think we will see better buying opportunities late summer/early fall.

A lot of people think that now is a better buying opportunity than ever, since legislation being introduced has somewhat derisked the industry... I'll take the opposite bet that a lot of people now have nothing to look forward to over the summer, and will seek better entry points.

James, I think we will see substantial upside over the next 15 months, with most of the movement occurring late this year (in case legislation gets passed earlier than expected, they allow mail order rec until provinces are correctly setup, etc.), and definitely next year when these companies really start bringing in the revenues.

Good luck to everyone who decides to play :)
 
#34 ·
Well good work. I'd have gone through a lot of underwear over that period.

To be fair, no one actually called you an idiot, least of all Humble. Craxy like a fox is what I recall, along with some salient questions and an invitation to update us - as you just have.

I'll continue to hold a very small, token (or is it tokin') position in WEED which remains well in the green from acb. It's my only high flyer (so to speak).
 
#38 ·
One thing I've noticed is that the analysts are using a price of marihuana of $9/gram in their 'projections' when they do research on this sector.

This is completely unrealistic as the illicit dealers, with their overhead including the risk premium associated with the criminality of their crop, only charge $9/gram.

$3-$5/gram as a retail price is more realistic, with government taking their cut, for a wholesale pre-tax price of $2-$3/gram.

A lot of these stocks are going to have their wings clipped big-time once actual pricing rears its ugly head. Kind of dumb that the Bay St. analysts are projecting prices similar to that of illicitly produced marihuana, for the 'legal' stuff.
 
#39 ·
HMMJ is now closed below where it closed on its first day of trading. Aphria dumped $75M of shares last week. That's nearly 60% of the entire NAV of HMMJ in one day by one company - it certainly can't soak up the supply of stock.

I'm guessing the retail price will be north of $5 but not by much, demand for legal pot at black market prices will be very strong as a vast majority of people would rather pay the same to buy it legally. $7-8 is likely, especially after taxes/fees. But that could quickly be pushed down by massive oversupply, which is one of the "big 3" risks of supply (massive overproduction/dumping/competition), regulation(taxes) and barriers to entry (nil).
 
#40 · (Edited)
HMMJ is now closed below where it closed on its first day of trading.
That's not what I see in the chart data. First day closed at 10.25 ish, today closed at 10.44
http://stockcharts.com/h-sc/ui?s=HMMJ.TO&p=D&yr=0&mn=0&dy=15&id=p43473877529

Aphria dumped $75M of shares last week. That's nearly 60% of the entire NAV of HMMJ in one day by one company - it certainly can't soak up the supply of stock.
Yup, that's a lot of share issuance. Hard to tell at this point if there's enough investor demand to make this work. Managing a bubble is a delicate business... the MJ companies would be wise to not get too greedy with equity issuance, because they should want equity prices to keep rising (this trend is what fuels the bubble).

If the companies get too greedy and try to issue too many shares, they will suppress price moves in the sector and there will be no bubble momentum.

I still have no position in HMMJ and continue to watch it, assessing whether I think there's enough upward pressure/inflows for a good run-away bubble.
 
#42 ·
The size of the fund has stagnated around $120 million. New money is not rushing in like I had hoped. I was hoping that a spark of greed and convenience with the ETF would start a runaway bubble price increase, but it's not happening at the moment.

I have no position.
 
#44 ·
That's because this came in when prices already rose 400%. If you added up all of the planned capacity, I think you would find that it is closing in on 1 million kg of product, if not more. That would be a billion grams. Or roughly enough for 10 million Canadians to smoke up 100 times a year. I feel like that means there is already sufficient capacity for a fully developed recreational market in Canada. And plenty more capacity is coming online.
 
#49 ·
My 2 cents:

I am an accountant by profession and have had the chance to work in multiple startups in the past 10 years. From my experience I would think the Marijuana industry is following the classical industry cycle:
1) Start up phase
2) Growth phase
3) Maturation Phase
4) Decline Phase

I think the Marijuana industry is currently in the start up phase where you have many small companies trying to establish and capture the market. This phase usually has very small players all spending allot of capital on R&D and marketing to encourage users beyond early adopters. I view this industry like the tabaco/alcohol industry. This industry will move through all the cycles and thus will eventually have a few companies surviving making lots of $ while many many more would go bankrupt or be bought out by the successful ones.

I do have a bit of $ in HMMJ because I am not able to choose between the many listed companies that will survive so I took the index approach. I think by next June when the feds legalize the industry you will see more growth in this sector but I dont believe that all of the companies will go bust as there is a large demand for their product and a legitimate backing of the government. The world is becoming more open to Marijuana in a way if yes to tobacco and alcohol why not Marijuana? Like the automotive industry and the alcohol industry and many more in the past, only a handful will remain standing but if you have an Index it gives you a good chance to make $ over all. There is lots of $ to be made by the government while also taking away market share from the mafias and gangs. So my conclusion was to invest a bit in the industry early on through the HMMJ index and ride out the peaks and trough for 2 years.
 
#50 ·
I agree and think it's in that early start up phase. Very high risk, and how can you reliably choose the winners and losers? I particularly like the sector index here because you will benefit from the sector growing from nothing to more-than-nothing. The same can't be said for mature sectors like banks or energy.
 
#54 ·
Just all players in the same space, all jockeying for position and some are a little better established. I don't plan on holding them long term, as I generally buy div payers but the current surge in the weed sector is an opportunity for a bit of fun and profit. I don't put a lot of money into them and usually set a target to get out. Sometimes it gets tempting to stay in, in which case I often set a trail stop to stop my emotions from costing me.
 
#58 · (Edited)
I smelled some sweet aroma on my walk back from lunch. Once pot is legalized, you'll find you can smell it everywhere in the city.

jargey, HMMJ is the sector ETF, the first marijuana sector fund in the world.

Here's a business idea, by the way (something I saw on my coffee break in Portland) -- a marijuana tour bus. They drive people around to different dispensaries throughout the city, since many people are new to this and have never been to one. They will show you the basics. I also strongly suspect there's some sampling going on, in the bus. Pot dispensaries limit the amount you can buy, so a bus like this that takes you around lets you buy far more in a single day. You can also sample your purchases without risking driving while under the influence.

A pretty good business idea. Be the first to do it in your city! Tourists from around the world will be coming to Canada.
 
#61 ·
HMMJ is now routinely trading about 1 million shares daily. I don't own any of this, but I'm fascinated by it.

I've never seen such a successful new ETF in Canada. Volume and AUM growth is incredible, it had just $10 million assets when first listed and now is more than $300 million. My guess is this will easily achieve over $1 billion AUM due to international interest.
 
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