The Evolve Marijuana ETF (TSX:SEED) has surged 33.4% over the past month as of close on August 28. The ETF is just barely in negative territory for 2018. Cannabis stocks have staged an enormous rally in August on the back of a huge investment courtesy of Constellation Brands into Canopy Growth (TSX:WEED).
Canopy Growth is the second most weighted stock in the Evolve Marijuana ETF, behind only Aurora Cannabis Inc. (TSX:ACB).
Both companies managed to secure licensing agreements with the province of Ontario which was also announced in August. Ontario, the most populous province in Canada, will only sell cannabis through online channels initially. Wholesale retail will commence in April 2019, or perhaps later if the province encounters complications.
Some of the other top holdings in the ETF include Cronos Group Inc., Aphria Inc., and CannTrust Holdings Inc. The surge in valuations for many of the top cannabis stocks has brought familiar voices out of the woodwork.
Overheating has become an early concern, but it is hard to see a significant dip or even stagnation as recreational legalization looms. For those concerned about the high valuations at some of the top producers, this ETF offers attractive diversification.
The Canadian cannabis industry will likely take several years to kick into high gear as the roll out promises to be fairly chaotic. In any case, the industry has received votes of confidence from market leaders and investors should be keen to look for any entry points still available heading into September.