CanadaInvestment IdeasNewsStock NewsStocksUSHere’s How the New YOLO ETF Matches up Against Horizons

Cannabis investors have yet another option for a marijuana ETF. AdvisorShares Pure Cannabis ETF (NYSE Arca:YOLO) is actively managed and contains a mix of both U.S. and Canadian stocks. The ETF began trading last week on the NYSE Arca Exchange and as of yesterday held 23 different stocks.
David Jagielski David JagielskiApril 23, 20196 min

Cannabis investors have yet another option for a marijuana ETF. AdvisorShares Pure Cannabis ETF (NYSE Arca:YOLO) is actively managed and contains a mix of both U.S. and Canadian stocks. The ETF began trading last week on the NYSE Arca Exchange and as of yesterday held 23 different stocks. It included many of the bigger players like Canopy Growth Corp (NYSE:CGC)(TSX:WEED) and Aurora Cannabis Inc (NYSE:ACB)(TSX:ACB). However, it also included stocks in other industries including real estate and multiple pharmaceutical companies as well.

The one disadvantage of the fund is that it does not hold any pot stocks listed on the Canadian Securities Exchange (CSE), including big names like Trulieve Cannabis Corp (CSE:TRUL) and MedMen Enterprises Inc (CSE:MMEN). Due to legal concerns and those companies still technically operating in violation of federal U.S. laws, the fund has steered clear of them and the problems that would likely arise for doing so.

However, being actively managed, we can be sure that if the laws change then we’ll likely see those stocks find their way into the ETF given the incredible growth opportunities that exist in the U.S. cannabis market. The question is, however, how long it will take for legislation to happen to permit some of the big-name U.S. pot stocks to make it onto the ETF. The fund is backed by banks and so you can be sure that the fund will tightly follow federal laws. The stocks are currently all listed on either the NASDAQ, NYSE or TSX (including the Venture Exchange).

In an interview with CNBC, Dave Nadig, who is the managing director of ETF.com, believes there’s a big advantage to having an actively-managed cannabis ETF:

This is a case where active management may make sense. This is a fast-moving space. … Being able to move around the edges of the industry, I think, is going to be really important for success

Comparison to the Horizons ETF

The YOLO ETF gives investors another alternative for a balanced cannabis investment that helps provide some more variety. And for some investors that might be a good option. However, for investors that are looking for a strictly U.S. play that takes advantage of the growth opportunities in that market, then the Horizons US Marijuana ETF (NEO:HMUS) that focuses on U.S. stocks would be better suited in that case. The problem right now is that there’s no ideal situation that combines a bit of everything, leaving investors with either not having all of the big names included, or holding two ETFs.

Many of the big cannabis stocks that are on YOLO can also be found on Horizons’ other ETF which is focused on Canadian stocks. As many of the larger companies have crossed over onto U.S. exchanges, that might be another good option for investors that may not want pharmaceutical stocks and other industries included.

As for costs, YOLO charges a net expense ratio of 0.74%, which is a competitive rate that’s slightly less than the one charged by HMUS which has a management fee of 0.85%.

Whether investors choose YOLO or either one of the Horizons’ ETFs, there are plenty of good opportunities there to take advantage of the fast-growing marijuana industry.

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