Investing in an ETF is often a good way to hedge your bets and have a more stable return, one that’s less volatile than some of the more individual stocks contained within it.
Over the past three months, we’ve seen marijuana stocks suffer big losses, with Canopy Growth Corp (TSX:WEED)(NYSE:CGC) losing 35% of its value during that time. Rival Aurora Cannabis Inc (TSX:ACB)(NYSE:ACB) has also struggled, falling 33% over the same time period.
The Horizons Marijuana Life Sciences Index ETF (TSX:HMMJ), which offers a broad basket of pot stocks, has also struggled. However, it has declined by 24%, and while that’s still a high amount, it’s not nearly as bad as the top two stocks in the industry.
And it’s impressive given that two of the largest holdings in the ETF are Aurora and Canopy Growth.
If we look at the returns over the past year, the Horizons ETF has risen by around 2%. Aurora and Canopy Growth, however, have generated returns of 20% and 29%, respectively.
Although the losses have not been as bad for Horizons over the last three months, the problem is that there’s been an even bigger disparity when it has come to gains in the past year. The past 12 months have still been good for pot stocks, but you wouldn’t know it from the Horizons ETF.
As of the ETF’s most recent update, July 29, troubled cannabis stock CannTrust Holdings Inc (TSX:TRST)(NYSE:CTST) was still held in the fund, but at 0.94%, any impact it will have here on out will be minimal.