A Canadian flag with a marijuana leaf on it is seen during the annual 4/20 marijuana rally on Parliament Hill in Ontario, Canada on April 20 2017. Picture: REUTERS/CHRIS WATTIE
A Canadian flag with a marijuana leaf on it is seen during the annual 4/20 marijuana rally on Parliament Hill in Ontario, Canada on April 20 2017. Picture: REUTERS/CHRIS WATTIE

The world’s largest marijuana exchange-traded fund is expanding its portfolio and doubling its stake in Tilray after coming under fire for not holding one of Wall Street’s hottest pot stocks.

Horizons Marijuana Life Sciences Index ETF, or HMMJ, added eight new stocks to its portfolio and boosted its holdings in several companies including Tilray, which experienced a 200-points swing last week and touched a high of $300 on September 19. The shares were at $111 on Wednesday morning.

Beyond Tilray, the Canada-based fund increased its positions in Aurora Cannabis, Canopy Growth and GW Pharmaceuticals, and added stakes in Aleafia Health, Choom Holdings and Eve & Co, among others. The ETF has $830m in assets under management after suffering its worst week of outflows since launching in April 2017. Its fortunes turned this week, as the fund halted a six-day streak of outflows and added $4m.

HMMJ, which tracks the North American Medical Marijuana Index, rebalances its positions on a quarterly basis. Until Friday, it did not hold Tilray, which now makes up more than 7% the portfolio, up from roughly 4%, making it the fund’s sixth-largest position.

“With the recent dramatic run-up in HMMJ, it stands to reason that many Canadian retail investors are choosing to participate in some profit taking right now,” said Steve Hawkins, chief executive officer of Horizons ETFs Management. “What appears to be driving these higher valuations are the large amount of new investors entering the space.”

Late to party

HMMJ did not hold Tilray in its portfolio because the fund’s previous quarterly rebalancing took place before Tilray went public on July 18. HMMJ saw massive outflows as a result and missed out on one of the biggest booms in the stock market this year as the shares have climbed 570% since the initial public offering.

“It’s better late than never, but they certainly missed a huge opportunity not having Tilray earlier,” said Eric Balchunas, a Bloomberg Intelligence analyst. “This is like putting a booster rocket into your ETF, and they’re kind of late.”

The frenzy around marijuana stocks comes ahead of Canada’s legalisation of recreational marijuana in October, which is projected to create a domestic market of more than $3bn.

“When you buy one of these niche, speculative-type ETFs, you expect the index to be very aggressive and adaptive,” Balchunas said. “That’s also a disappointment for investors.”

Bloomberg

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