Marijuana News Today: U.S. Investors Flood Marijuana ETF

marijuana news today
iStock.com/HighGradeRoots

Marijuana News Today

U.S. investors are really hungry for marijuana stocks, as the marijuana news today shows. A U.S. exchange-traded fund (ETF) that tracks Canadian pot stocks has been raking in millions of dollars.

The U.S.-listed ETFMG Alternative Harvest ETF (NYSEARCA:MJ) was already a $436.0-million fund before it received a boost of about $22.0 million in investments in August. That’s good enough to be the largest monthly inflow since February, and it marks the bullish sentiment that has spread far and wide over the past two weeks. (Source: “American Investors Pile Into Marijuana ETF,” Bloomberg, August 29, 2018.)

The fund has grown by about 35% since mid-August, when alcohol producer Constellation Brands, Inc. (NYSE:STZ) sent stocks soaring with its $3.8-billion investment in Canopy Growth Corp (NYSE:CGC).

The Constellation/Canopy deal has sparked a renewed interest in marijuana stocks from American investors who have been wary of the market due to the prolonged correction that set in following the announcement of the Canadian marijuana legalization date.

Advertisement

Meanwhile, reports show that more alcohol companies are looking to invest in marijuana companies, further fueling positive feelings about the legal cannabis industry.

What This Means for Marijuana Stocks Long-Term

One of the biggest hurdles in the way of the legal marijuana sector reaching its true potential is a shortage of capital. After all, when you’re building a global industry from the ground up, you need an immense amount of money.

Other barriers to investment and growth include archaic laws and skittishness about buying/selling what was once an illegal substance.

The U.S. has, for the most part, had to wrestle with those obstacles, but we’re seeing that begin to change. More investors are finding ways to interact with the marijuana market, whether through ETFs or marijuana stocks that are listed on major exchanges like the Nasdaq and the New York Stock Exchange.

As the options for investors open up, so too will the money flow, which will allow the marijuana sector to grow.

Tilray Stock

The marijuana news today surrounding ETFs is certainly positive, and that positivity is equally matched by growth in the overall marijuana stock market.

Take Tilray Inc (NASDAQ:TLRY), for example. Tilray stock is up about 47% on the week as the marijuana rush continues apace.

Today, however, the stock price is down about five percent. And frankly, there’s a good reason for that pullback. While the numbers around TLRY stock are certainly positive, there is concern percolating about its valuation versus its financials.

Being the first marijuana stock to have an initial public offering (IPO) on the Nasdaq, Tilray stock has grown by leaps and bounds since going public.

But its latest financial report showed that the company sold less than $10.0 million worth of cannabis in the second quarter, while maintaining a market value of about $5.0 billion. (Source: “Valued at $4.8 billion, cannabis firm Tilray posts $10 million in sales,” Bloomberg, August 29, 2018.)

The disparity of those numbers has some investors worried—and rightfully so.

While the future of the marijuana sector is global—and I believe that the calls of overvaluation in the pot stock market tend to be overplayed—in this case there might be more meat on the bone.

TLRY stock has been skyrocketing and the company has more potential, but I believe that the marijuana stock market is going to react negatively to the company’s financial disparity, sending the stock on a bit of a correction.

Aurora Cannabis Stock

While not having quite the run that Tilray stock has had, Aurora Cannabis Inc (OTCMKTS:ACBFF, TSE:ACB) is still sitting pretty, up about eight percent over the past week.

Unlike Tilray, Aurora doesn’t have to contend with massive growth in a short time period creating a chasm between sales numbers and valuation.

As such, I don’t think that Aurora Cannabis stock will have quite as big of a reckoning as the one that TLRY stock will face.

At the same time, ACBFF stock is down about four percent while the marijuana sector is going to eventually enter a pullback following the huge gains we’ve seen in August.

All things considered, it was still a strong week for Aurora Cannabis stock and Tilray stock as the cannabis market continued to climb, even as a correction looms.

TLRY & ACBFF Stock Performances

In the below chart are the recent performances of TLRY stock (black line) and ACBFF stock (blue line).

Chart courtesy of StockCharts.com

Analyst Take

As more investors are granted new ways to interact with the marijuana stock market, we’re going to see continued growth from pot stocks. It’s a simple equation, but one that bears repeating now and again.

The growth seen in the marijuana news today from ETFMG Alternative Harvest ETF only solidifies the notion that progress is being made. That progress will continue to propel the legal marijuana sector to ever-increasing new heights.

The overall pot stock market, meanwhile, has to face renewed charges of overvaluation due to the sudden explosion in growth in August.