Why the Alternative Harvest ETF (MJ) is My Top Stock Pick for 2021

Marijuana stocks are poised for a banner 2021, and likely beyond. To gain access to that rally, the Alternative Harvest ETF is your best bet.

My top stock pick for 2021 isn’t actually a stock. It’s an ETF. We typically try and stick to stocks at Cabot, though we do dabble in exchange-traded funds, especially when we like a particular sector. In this case, I’m extremely bullish on an entire sector for next year: marijuana stocks. And the best way to gain access to that sector is via the ETFMG Alternative Harvest ETF (MJ).

Marijuana stocks peaked way back in January 2018. They then spent the better part of two years nose-diving—the North American Marijuana Index lost roughly 85% of its value during those two years, as this six-year chart shows.

Notice the recovery since the March 2020 bottom? Marijuana stocks have nearly tripled in the last nine months. And while many other growth sectors have risen fast since the February/March coronavirus market crash, cannabis stocks are advancing faster than most—and yet are still trading at less than half their peak values from three years ago.

Did momentum in the cannabis sector slow down during these last three years? No!

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Retail sales of medical and recreational cannabis in the U.S. are expected to top $15 billion this year, which would be a 40% improvement from 2019 and a 50% improvement from 2018. In the next four years, legal marijuana sales in the U.S. are expected to triple. And those estimates came before Arizona, Montana, New Jersey and South Dakota all voted to legalize recreational marijuana use on Election Day last month.

In other words, momentum in the legal marijuana industry never waned in the last three years. Now, it’s clearly accelerating. And as the pandemic and accompanying social distancing and lockdowns rage on, people will be consuming more cannabis products in the coming year, not less. All of that bodes well for marijuana stocks.

Why to Buy the Alternative Harvest ETF (MJ)

I could give you one or two cannabis stocks with good charts and call it a day. Indeed, industry leader Canopy Growth (CGC) is up a whopping 80% in the last two months; Aphria (APHA) is up 50% this year; GW Pharmaceuticals (GWPH) is up 35% in just the last six weeks. But why not buy an ETF that tracks the price of all the best marijuana stocks—those three stocks are the Alternative Harvest ETF’s top three holdings.

With marijuana ETFs, you take on less risk than if you try and pick one or two marijuana stocks. Because the industry is still in its adolescence, individual companies can be unpredictable and, as a result, volatile. If you pick the wrong cannabis stock, it can do damage to your portfolio. However, by picking a basket of marijuana stocks, at a time when the group as a whole is priced nearly 60% below its peak from three years ago despite the prospect of tripling sales by 2024, you’re betting on the marijuana sector as a whole, not just one stock.

And the Alternative Harvest ETF – the first marijuana ETF in the U.S., and the largest—gives you the safest, most reliable access to this exploding industry. It’s up 61% since mid-March, and 37% in the six weeks since the election – and yet still down for the year…

The Alternative Harvest ETF (MJ) is down for the year, but up more than 60% since March.I’m betting it won’t be down again in 2021; I think it will be way up. Having cooled off a bit in the last two weeks on the heels of a monthlong run-up, this a great entry point into what I believe will be the hottest industry next year – and beyond.

Now, if you’re interested in achieving an even better return in marijuana stocks, or perhaps want to build an entire portfolio around them, I highly recommend you subscribe to our Cabot Marijuana Investor advisory, where Chief Analyst Tim Lutts boasts a year-to-date return of 70.5%—more than triple the 22.4% return in the North American Marijuana Index this year!

To learn more, click here.

Chris Preston

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Investment analyst and Chief Analyst of Cabot Wealth Daily, Chris Preston brings you all the latest from the investing world. Sign up to get updates and breaking news delivered FREE to your inbox. Get unlimited access to our library of complimentary investing reports.

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Comments

  • We’ll agree to disagree on this one (in the friendliest way of course!) I agree cannabis will be a terrific investment next year and beyond, but I don’t like the ETFs. Through their “diversity”, they aren’t focused on the right areas. MJ is too heavily focused on Canadians, and even includes companies like Universal, which is a tobacco producer. I think the Canadians will attract a lot of investment interest because those are the familiar names that investors will remember from the previous big runups in cannabis stocks. BUT, they are the wrong stocks to be investing in. The American MSOs are where the revenues and earnings growth is going to be, not in the “yesterday’s news” Canadians. FREE GRATUITOUS PLUG: If you want good knowledge backed diversity, the best starting point is Tim’s MJ Investor letter, not any existing ETF.

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