Invest in cannabis: pros and cons of wearing marijuana in our portfolio

Sara Rivas
Finect

Cannabis investment is not a new trend.In fact, the first ETF of the sector in the United States emerged in 2017.However, in recent months the trend has taken popularity to heat from the legalization of the plant, both for medicinal and recreational use.Canada and the United States are showing this.The last American state to take the step has been New Mexico.The southwest region of the country has joined a list formed by about 20 states among which are New Jersey, Arizona, Virginia, Mississippi, Montana, South Dakota or New York.

Precisely, only in New York, the new legislation determines a 9% tax on cannabis sales, to which additional 4% to be distributed among municipal and county authorities should be added.In total, the authorities plan to raise 350 million dollars a year only in taxes.Therefore, it is not surprising that many analysts affirm that the unlocking of a law, which has been in the halls of the different assemblies for years, has been unraveled following the fiscal hole caused by the pandemic by COVID-19.

"Está claro que es un sector de moda en los últimos años, el avance en su legalización ha dado lugar a nuevos negocios legales relacionados con el sector que rápidamente han adquirido un gran volumen", afirma Antonio Jiménez Colilla, asesor financiero de Mapfre, presente en la plataforma de asesores de Finect.An example of this is the Canapy Growth company, which today reaches 30.000 million dollars.

But beyond a fashion, and its recreational use, its medicinal benefits are scientifically proven.The National Academy of Science, Engineering and Medicine of the United States, after reviewing more than 10.000 investigations, classify the benefits of cannabis in different categories: conclusive, moderate and limited or null evidence.The most conclusive results claim that marijuana is effective for the treatment of chronic pain, reduction of nausea after chemotherapy and the reduction of multiple sclerosis symptoms.But, in addition, different studies demonstrate their usefulness against other diseases, such as Parkinson, Alzheimer's, certain neurological disorders and even epilepsy.

But what about its economic benefits?Estimates foresee that only in the United States could move up to 30.000 million in 2025.The ETF MG Alternative Harvest (NYSE: MJ), first cannabis ETF to quote in an American bag, in December 2017, it rose about 80% from March minimum and in 2021 it already has 34.93%.The truth is that "investments in these assets have supported extreme volatilities throughout their stock market life, which makes only very aggressive profiles can consider investing in this sector," says Jiménez Chaco.

Para este perfil, el asesor financiero de Mapfre considera que a través de un vehículo bien diversificado podría ser adecuado invertir entre un 5% y 10% de la cartera.Above all, given the current situation in which we are, where fixed income and variable income markets have very tight assessments, quoting many of them in historical maximums."These assets could offer us an unfortunate alternative where they can obtain the profitability of the bag without following the same course," he says.

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In this same line Javier Molina, from Etoro, trusts the opportunities of a sector that, "although it has folded its value from a minimum of 2020, with respect to the average is not expensive, nor close to maximums".In fact, the ETF Mg Alternative Harvest is 50% below its 2018 maximums, when it reached 40 dollars.In any case Molina recommends investing in this trend through ETFs."It is very difficult to carry out a selection of concrete actions because there have been many variations of companies and, in addition, they are not the same.It must be taken into account if they have plants production, where they have them, if they have the capacity to perform a first treatment or not..."

The best thing are ETF as the MJ or the amplify Seymour Cannabis (NYSE: CNBS), which most recently created (2019) invests at least 80% of its portfolio to companies related to cannabis.

Associated risks

But not all experts finish seeing their appeal.Among them the financial advisor of Andbank, also present on the Finect platform, Francisco Martínez."I dare to catalog as an investment opportunity something that raises so many doubts.The first has to do with the regulation of its use.While the therapy is increasingly widespread, recreational use is allowed in few countries.In many others there is a certain legal vacuum and this raises a regulatory risk that must always be present in investment decisions, "he says.

Por otro lado, Martínez recuerda que la OMS considera esta sustancia como una droga, y los riesgos morales que se derivan chocan frontalmente con inversiones compatibles bajo criterios éticos y responsables, cada vez más presentes en la industria.

Another of his problems, according to Jiménez Chabthat they can give us track of how the real market will be taken this type of products ".Hence, like Molina, the Mapfre advisor recommends investing through an ETF or investment fund that allows diversifying among the quoted companies in this sector.

A lo anterior, el asesor de Mapfre recuerda el inconveniente de la volatilidad en la que se mueve el sector a causa de la incertidumbre, "lo que da lugar a cambios bruscos en las valoraciones por nuevas regulaciones y deja fuera a muchos inversores"."The regulatory issue in certain countries where politics changes from hands very fast, make it even more difficult to specify how the opening of new cannabis markets or if where they are current.

Finally, Jiménez Chaco mentions the reputational problem when considered as "a drug" for certain users, which can make certain companies be reluctant to enter the sale or distribution of products related to the plant for fear of losing brand imageWhile consumers change their concept.