Alternative Investments: Cannabis ETFs Because States are COVID-strapped for Cash
Besides, marijuana ETFs can benefit from bullish growth projections.
According to a report from ArcView, a San Francisco-based cannabis investment and research firm, the cannabis market in the USA will grow to $33.9 billion by 2025 at a CAGR of 18.2%. During the pandemic, marijuana was decreed as essential, and business has been booming since then (US News). Further, more states could legalize cannabis as a source for additional revenues. (ETF Trends)
Legalization at the federal level
According to one view, marijuana is likely to be legalized at the federal level by 2021 and sail through both the Senate and the House in 2021 – if the Democrats capture the Senate.
This could prove to be very bullish for pot stocks.
States in a liquidity crunch
Again, as many as 16 states were expected to go for legalizing cannabis this year, but their efforts have lost momentum due to the pandemic, according to Canaccord Genuity analyst Bobby Burleson.
However, given the hit that most states’ finances have taken from COVID, these efforts may soon resume to beef up revenues from an additional and lucrative source – pot sales.
According to Barrons, a study of 38 states forecasts that they could confront significant budgetary shortfalls in the fiscal year ended June 30.
Cannabis will soon find new applications such as in health and wellness, oil extracts, tinctures, topicals, and capsules, all pointing to new markets that could prove beneficial for cannabis companies.
The Global X Cannabis ETF (NASDAQ: POTX) is a likely candidate that could turn further bullish based on the fundamentals discussed above.
It holds companies “involved in the legal production, growth, and distribution of cannabis and industrial hemp, as well as those involved in providing financial services to the cannabis industry, pharmaceutical applications of cannabis, cannabidiol (i.e., CBD), or other related uses including but not limited to extracts, derivatives or synthetic versions.”
The ETF has an expense ratio of 0.50%.
The fund is down 23.12% year to date but up over 49% over the last three months.
Related Story: Cannabis Growth Projections Impressive; POTX to Benefit
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