Page 29 - DIY Investor Magazine - Issue 27

‘MANY BRITS COULD SOON BE HOLDING CANNABIS IN THEIR RETIREMENT PORTFOLIOS’
The number of patients who have been approved for medical cannabis treatment also continued to rise in Australia and Israel. Australia recorded a further 6,000 patients in January 2021 and another 5630in August4. Similar developments are also playing out in in other countries.
The London Stock Exchange (LSE) is expecting to have medical cannabis listings as early as the first half of 2021 which means that many Brits could soon be holding cannabis in their retirement portfolios.
WILL THE RALLY LAST THIS TIME?
Some investors are still skeptical. The first wave of cannabis in 2018-19 came just as quickly as it disappeared. Will history repeat itself?
We believe that this time the price increase is on a more solid footing, being driven by the drastic change of power in the United States and the introduction of a new investor class into this theme, the US institution.
In 2018, valuations rose due to expected growth after legalization in Canada. This time, however, it is about the US, the world’s largest consumer market. The addressable market in the US is estimated to be approximately seven to ten times greater. This immediate opportunity has current implied growth rates around 25% for the next five years and if the earnings continue to materialize, valuations may continue to catch up to the rest of the market5.
DIRECT INVESTMENT OR MEDICAL CANNABIS ETF?
Investors have a choice between direct investments in cannabis stocks and a medical cannabis ETF.
As cannabis is a regulated substance, investors must be careful that an investment does not violate local laws, even if the stocks themselves are perfectly legal to trade in Canada and the US.
‘MANY BRITS COULD SOON BE HOLDING CANNABIS IN THEIR RETIREMENT PORTFOLIOS’
4 https://www.tga.gov.au/medicinal-cannabis-role-tga 5 Source: Purpose Investments
An ETF is a basket of stocks that tracks the performance of an index such as the Medical Cannabis and Equity Index. ETFs trade on a stock exchange and can be bought in the same way as a share through a broker.
It is an accessible way to buy into a theme without having to pick individual stocks, provides diversification and the provider will have done the due diligence to ensure that the ETF is legal in the country it is registered in. Of course, like shares, ETF prices can go down as well as up and an investor’s capital is at risk.
To buy this trust login to your EQi account
The Medical Cannabis and Wellness UCITS ETF (CBDX) - IE00BG5J1M21
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29 DIY Investor Magazine | Mar 2021